Measuring and improving the return on investment generated by marketing activities is a major issue for both marketing executives and marketing service providers. CMO's are expected to deploy marketing budgets in the most effective and efficient ways possible, and marketing ROI (when properly calculated and used) is a powerful tool for informing marketing decisions and guiding marketing investments. Marketing service providers are feeling increasing pressure to provide sound and persuasive ROI estimates in order to win business. To put it bluntly, prospective clients are increasingly telling MSP's to "show me the numbers!"
A recent research report by the Lenskold Group provides some interesting insights regarding the use and importance of marketing ROI. This report is based on a survey of 601 marketing practitioners that was conducted earlier this year. The "2009 Lenskold Group/MarketSphere Marketing ROI and Measurements Study" published last month reports that about one quarter (24%) of firms say they calculate return on investment or some other type of profitability measures for at least some of their marketing activities/campaigns. Another 35 percent of firms say they calculate some financial metrics such as cost per lead or cost per sale, but not profitability measures such as ROI or net present value. Lenskold Group says the number of companies reporting the use of marketing ROI and/or other profitability measures has remained steady compared to 2008.
While the actual use of marketing ROI appears to be steady, there is no doubt that marketing practitioners are under increasing pressure to measure marketing ROI. According to the Lenskold Group study, almost two-thirds (65%) of firms report that their CEO/CFO's are making greater demands that last year to show ROI as part of the marketing budget approval process, and three out of ten marketers say that the demands are much greater.
This study also suggests that measuring and managing marketing ROI helps improve business performance. Fifty-eight percent of firms that report using marketing ROI metrics say they expect to grow more than their primary competitors in 2009, while only 43 percent of companies using traditional marketing metrics expect to outperform their competitors this year.
The growing demand for accountability in marketing means that measuring marketing ROI will continue to be a major issue for marketing executives. Marketing service providers should make creating persuasive ROI estimates a core part of their selling process.