Marketing ROI is an idea that looms large in the minds of most marketing leaders. It’s a persistent question, a thorny challenge and—all too often—a stubborn headache. What makes it so difficult? Is it time to rethink the whole question? Let’s take a moment to pause and reflect.
Research from this past summer found that 84% of marketing leaders are under pressure to prove the return on investment (ROI) of their marketing expenditures.
We marketers often use the term loosely—as a synonym for impact, results or effectiveness. But to a CFO, ROI has a very specific meaning. It’s “the ratio of profit made in a financial year as a percentage of an investment”
Back in the 90’s, an alternate formula—known as ROMI (return on marketing investment)—was developed to bridge the gap between traditional ROI and the realities of marketing.
But two decades later, more than half of CMOs say they still struggle to prove the ROI (or ROMI) of their department’s work.
So what gives? Kathleen Schaub has just published an excellent white paper that tackles this question with great depth and insight. The title really made us smile: “Marketing Is Not a Vending Machine.”
Schaub’s thesis: Marketing will never be a machine where specific inputs yield predictable outputs. It’s more like weather or the stock market—highly complex and difficult to predict with accuracy.
Markets, she argues, are complex adaptive systems. Control is distributed. No one is in charge.
Because of this complexity, modern attempts to tackle the ROI question through attribution models are inherently flawed. “Think of a cookie recipe”, says Schaub. “How can cookie revenue be apportioned to individual ingredients? Attributing X% of outcome to sugar and X% to baking soda isn’t helpful.”
Beyond its unhelpfulness, many would argue that this fractured mindset takes the spark out of a discipline that depends greatly on creativity. As Seth Godin puts it, “ROI will never get us to an artistic leap; it’ll just get us to pedal faster.”
Then there’s the question of time. The more it passes, the more complexity is introduced. It’s very tempting to make things simpler—and match the CMO’s time-boxed view of ROI—by focusing on the short-term. But that road leads to more harm than good.
Clearly there are many challenges here. But what about solutions? Schaub suggests starting with a shift in mindset. Think of marketing not as a cost centre but rather a portfolio of investments with potential payoffs that arrive along different time horizons.
Once you’ve made this shift yourself, start working on the senior management team. Surely they can relate to the metaphor. 😉
This shift in mindset doesn’t mean giving up on measurement. It just means that performance metrics are less about scorecarding or taking credit and more about navigating a complex landscape.
In the end, Schaub’s argument is really about acknowledging and learning to work with complexity.
The vending machine view demands predictable outcomes as if marketers had full control. It’s about the world as we wish it would be. Not the world as it truly is.
But if we accept complexity and learn to work with it, our portfolio of investments is much more likely to pay off.