ROI isn’t THE purpose of marketing

by Tony Fannin, president, BE Branded

“What’s my ROI in this campaign? If I spend this amount in marketing, how much will I increase in sales?” ROI is the single most measured and talked about benchmark in business, especially in marketing. For financial types, it helps them justify the spend in marketing and advertising. And with new technologies today, like the internet, we can actually measure what each effort brings in. So, what’s wrong with using ROI as THE single measure of success?

Here are a couple of points:

1. Marketing success is also because of brand success
For many companies, their brand is their greatest asset. If you don’t believe that, tell me which you would rather have: an increase of 30% in your current sales because of a SEO and PPC campaign or Apple’s brand? Evaluating a brand is beyond the simple ROI measurement. You can measure a promotion or advertising campaign’s effectiveness, but what does it do to the long-term value of the company? If you concentrate too much on ROI to guide marketing decisions, you could be damaging the long-term value of your brand. Branding isn’t the only thing that ROI can’t measure. Does customer loyalty, customer satisfaction, perception of your company, employee morale, and motivation of distributors matter to you? Do you think they make a difference to your bottomline? Can you measure these traits with ROI? If you sacrifice brand qualities in favor of exclusively depending on financial ROI, you could be damaging your company more than you are helping it.

2. Are you measuring the right numbers
Looking at the numbers isn’t bad. What you have to be sure is that you’re looking at the right numbers. Business has many things to measure, but if you blindly assume that sales ROI is THE only number to concentrate on, you could be missing potential revenue. At worst, you could be damaging your long-term brand and health of the company. For example, one of the leading gas station companies in China owned about 50% of the market. Their C-level executives decided to concentrate on doubling revenue by increasing the number of stations. They felt if they achieve  their target goal of number of stations, that would achieve their ultimate target of double revenues. They achieved their “numbers”. They proved their business and marketing acumen. Something strange happened, their overall revenue went down. Why? After some post-research, they found out that a majority of stations was underperforming. Because of the lack of training, cutting costs to where it affected customer experience, and depending on one or two marketing “silver bullets”, customers were completely underwhelmed. You see, they’ve built up a brand that meant something, so when the shear number of stations couldn’t provide the same level of experience, many customers were disappointed and bought fuel elsewhere. The company’s problem was they concentrated on the wrong numbers which ultimately damaged their real value, their brand.

Measuring ROI isn’t wrong. It’s wrong to focus solely just on that. Starbucks is a clear example. They built their brand on the coffee experience. In order to boost short-term profits, they introduced several initiatives such as breakfast sandwiches. Now the ROI was in the black. It makes money, but as Howard Schultz sees it, they’ve lost their way and have strayed from their true core. Even employees feel like they are working at a fast food joint instead of being the special person they’re supposed to be – a skilled barista. This is one factor of why Howard Schultz is getting more involved again with his creation. He’s sees the long-term brand damage that short-term ROI is causing.

So in the end, be more open minded about marketing, what you measure, and what you call success. In business, as in life, money isn’t everything.


About Be Branded

Tony Fannin is of President of BE Branded, an integrated marketing firm who helps clients BE Somebody to their customers. If you aren't somebody, then you are commodity.

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