ROI and Marketing: a difficult conversation?
Firstly, return on investment (ROI) is not a new concept, but can you articulate it with marketing?
According to Forbes , “companies expect CMOs and other marketing leaders to provide quantifiable evidence that marketing investments are contributing to real business outcomes.” This isn’t page views or ‘brand building’ spend but real, tangible net return.
Defining and measuring marketing success should not be an elephant in the (board) room. Below, we show how to measure marketing ROI and how a marketing expert can quantify the value to the C-Suite.
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Money well spent: calculating your marketing return
Marketing ROI is also known as MROI and is not to be confused with ROMI. Wikipedia  says return on marketing investment is “the contribution to profit attributable to marketing (net of marketing spending), divided by the marketing ‘invested’ or risked”. This requires estimation of the incremental sales attributed to marketing and associated contribution or margin.
The journal of Applied Marketing Analytics  recommends marketers clearly define what they are measuring. Specifically, due to differing calculation methods, scope breadth and where measuring on the response curve. They define MROI as “the financial value attributable to a specific set of marketing initiatives (net of marketing spend), divided by the marketing ‘invested’ or risked for that set of initiatives.”
Why MROI matters
Readers of why marketing and finance should be BFF, will know that inability to measure MROI can hinder marketing. It could lead to budget cuts or frustrate owners who want to know their money is well spent.
Many marketing teams spend money on paid search and with good reason. The headline inbound marketing statistic is $1 spent on Google AdWords yields $2 revenue (the American Economic Association) . There are examples of up to 13.11x the money ‘risked’ but that is the exception. Some would define $2 revenue for $1 spent as an ROI of 100% (the value of the initiative net of marketing spend divided by the spend). Others would question the contribution on the $2 revenue and it paints a different picture.
Sales teams that want improving sales can get frustrated with marketers ‘not pulling their weight’ if they cannot measure value add. Some sales teams view marketing as a ‘brand builder’ and people who update websites.
How a marketing consultant can open up dialogue
Our marketing experts support all aspects of business strategy and create robust marketing plans aligned to sales objectives with measurable results. A common language of metrics means MROI is simplified.
In summary, open discussion with the C-Suite allows CFOs, CIOs and COOs to realise the value of marketing. It creates company-wide alignment.