Marketing ROI: Art or Science

Famed author and management consultant Peter Drucker once said: ''Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business." However, traditionally in many companies, marketing has been categorized as a cost or — at best — an investment. More than ever, chief marketing officers (CMOs) are under pressure to show the direct contribution of their departments to companies’ financial results, all while their budgets are being slashed.

Tying the results of a marketing tactic to the actual financial performance of a company is no easy feat. You may not have ready access to business performance or transaction metrics to allow correlation. The sheer array of channels and options available to marketers, and the rise of new marketing tactics such as social media, only add to the difficulty of measuring clear results. However, even in the midst of all these challenges, you can show your executives the clear contribution you're making to the bottom line by laying down a clear marketing plan that's designed to address specific objectives.

Where to Start?
According to marketing guru Philip Kotler, there are two types of CEOs: "those who know that they don't understand marketing and those who don't know that they don't understand marketing.'' Although this might be a bit of an exaggeration, getting your CEO on your side can definitely help your marketing department thrive in ROI-driven times.

Not every marketing department has direct access to its company's CEO, but they should try to understand the key drivers of this top executive to better support his or her overall strategies and goals for the organization. In their book “Marketing Champions,” Roy A. Young, Allen M. Weiss and David W. Stewart outline these questions to help you get started:

• What does this top executive know and appreciate about marketing?
• What does he need from marketing in order to execute strategic directions?
• How can marketing help improve performance on companies’ key performance indicators?
• What keeps him awake at night?

If you don't have direct access to your CEO, examine recent speeches or articles to gain some insights into his goals. Your own annual report may give you information about specific strategic objectives for the company which must be supported by your marketing initiatives.

Once you get an idea of where your CEO stands with regards to marketing, the first and most important thing to do is set clear, defined and measurable objectives for your programs and campaigns. Those objectives should be set within a reasonable time frame for achievement. Identify exactly what you're trying to accomplish. This is where your CEO's challenges come in handy: they're the key driver guiding you to build a solid plan.

Once you've identified what your marketing objectives are, prioritize them and ensure they're aligned strategically with the overall goals of the organization. In order to ensure your executives clearly understand the true value of your programs and the contribution they make to the bottom line, communicate marketing's outcomes rather than its activities and tactics, and tie the outcomes to metrics the C-suite can relate to.

Here are some of the most common CEO challenges in these turbulent times, aligned with the marketing objectives that can help cater to these challenges:

• Sustained and steady top-line growth: Customer acquisition, cross-sells, awareness, lead generation
• Profit growth: Increase customer lifetime value, increase share of wallet, product mix
• Customer loyalty/retention: Upsell, churn reduction, advocacy, increase share of wallet
• Corporate reputation: Reputation management, branding, thought leadership
• Enhance shareholder value: Stakeholder/shareholder communications.

At this stage, it's important to steer clear of all ''marketing talk'' that works on a daily basis in a marketing department but that C-suite execs may not be aware of. To a CFO, ROMI (return on marketing investment) doesn't mean much.

On the same note, don't lose your C-suite by going into great detail on campaign metrics such as open and clickthrough rates, readership, cost per lead, impressions, cost per thousand, etc. It's best to stick to their language in order to win them over.

Here are some examples that showcase how to tie metrics back to marketing objectives, which will then allow marketers to speak to the C-suite about their challenges and what's being done from a marketing point of view to address them. Tying your marketing objectives directly to your CEO's challenges will help build credibility for your department as well as increase buy-in from your stakeholders for your programs.

Example 1
CEO challenge: Sustained and steady top-line growth
Marketing objective: Customer acquisition
Measurable outcome: Captured 100,000 incremental households in a database in three months, which resulted in 10,000 new sales for product X.

Example 2
CEO challenge: Profit growth
Marketing objective: Cross-sell and upsell to existing customers
Measurable outcome: Average order value increased 10 percent in six months with an in-store promotion. Product mix on items sold increased profitability by 2 percent during the promotional period.

Example 3
CEO challenge: Customer loyalty/retention
Marketing objective: Reduce customer defections
Measurable outcome: Loyalty program put in place reduced attrition rate by 5 percent in one year.

Crafting Your Overall Plan
After each marketing objective has been established and validated by your executives, identify what are the clear tactics that can help you achieve those objectives, and how will you measure them. It may also be worthwhile to refine your marketing objectives for specific campaigns, since not all programs may serve all objectives of your overall marketing plan.

For example, if you're trying to increase sales by $1 million within a certain product line or category in the next year, it may be helpful to define which customer segments would provide the best opportunity for that type of increase. Then build a series of campaigns that target them in particular.

Building a calendar of promotional activities and mapping those activities against your target audiences is a smart way to quickly determine the best time to promote your products or services in ways that provide the greatest relevance and impact. Ultimately, your plans should be built around the greatest opportunity for return from each focused campaign.

Choosing the right marketing partners is an important part of your overall marketing strategy. Your partners should be able to speak intelligently to your objectives, and understand and be able to deliver on your requirements for measurability. They should also be able to support your campaigns across a broad array of marketing channels, with suggestions that can improve your return.

Finally, analyze the data you get from these programs with a sharp eye to gain some significant insight about them. Should you be looking at the number of people you drove to your store? The ones that actually purchased something after visiting your store? The actual profit you derived from these sales? What did you learn about your customers that can help you continually improve your targeting and messaging in subsequent efforts?

You'll realize that all this can quickly amount to a lot of data. Even though data has been available to marketers for a long time, there seems to be more data available today, along with more sophisticated tools to allow marketers to breathe life into the data and make it speak directly to the C-suite's top concerns. This data can steer you in the right direction by highlighting the efforts that yield the best results, and providing insights to improve future programs.

Remember that your plan isn't set in stone; be flexible so that you can tweak and adjust your plan based on the results you get. There are no more finite marketing campaigns. Marketing is based on continual, ongoing communications with your audience to deliver improved business performance.

Natalie Dzepina is marketing project manager at Transcontinental, a Montreal-based provider of printing, publishing and marketing services. Reach Natalie at Natalie.Dzepina@transcontinental.ca.