ROI — the Holy Grail of Marketing (and Roughly as Attainable)

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The topic of “Marketing ROI” has crossed my inbox and feed reeder on several different fronts over the past few weeks. I don’t know if the subject actually has peaks and valleys, or if it’s just that my biorhythms periodically hit a point where the subject seems to bubble up in my consciousness.

The good news is that the recent material I’ve seen has had a good solid theme of, “Don’t focus too much on truly calculating ROI.” The bad news is that that message has been in response — directly or indirectly — to someone who is trying to do just that.

One really in-depth post came from — no surprise — My Hero Avinash Kaushik. He did a lengthy post, including five embedded videos, each 4-9 minutes long: Standard Metrics #5: Conversion / ROI Attribution.  What the post does is walk through a series of scenarios  where a Marketer might be trying to calculate the ROI for their search engine marketing (SEM) spend. He starts with the “ideal” scenario: a visitor does a search, clicks on a sponsored link, comes to the site, moves through and makes a purchase. In that case, calculating/attributing ROI is very simple. But, that’s just a setup for the other scenarios…which are wayyyyyy closer to reality. The challenge is that, as Marketers, it’s we all too often ignore our own typical behavior and common sense so that we can assume that most of our potential customers behave in an overly simplistic way. When was the last time you did a search, clicked on a sponsored link, and then, during that visit, made a purchase?

Unfortunately, very, very, very few Marketing executives would ever actually spend the 45 minutes it would take to truly consume all of Avinash’s post.  And, honestly, that’s not really “the solution.” The smart Marketing executive will find the Avinashes of the world and will hire them and trust them. Avinash (and John Marshall) really make the case that “time on site” is a more useful metric for assessing the effectiveness of your SEM spend — ROI just brings in too many variables and too much complexity.

In short: Don’t treat ROI as the Holy Grail and try to tie every one of your marketing tactics to “revenue generated.” For one thing, you will head down so many rat holes that you’ll start drooling whenever someone says, “cheese.” For another thing, you will find yourself facing decisions that seem right based on your ROI calculation…but that you just know are wrong.

Another place where this topic came up was in a thread titled ROI Models – High Level Thinking on the webanalytics Yahoo! group. I responded, but others chimed in as well. Some of those responses, in my mind, are still a bit too accepting of the premise that “I need to calculate a hard ROI.” But, other responses go more to a “back up and don’t look at ROI as the be-all/end-all.”

And, finally, ROI crossed my inbox last week by way of a CMO Council press release from back in January. I saw this when it came out, but a colleague forwarded it along last week, which prompted me to re-read it. The press release emphasized how much marketers are focussing on accountability when it comes to their marketing investments. One data point that jumped out was “34 percent [of marketers] said they were planning to introduce a formal ROI tracking system.” This is an alarming statistic. Marketers absolutely should be focusing on accountability — finding ways that they can measure and analyze the results of their efforts. But, if they truly are framing this as the need for “a formal ROI tracking system,” then that means 34 percent of marketers are going to be largely chasing their tails rather than driving business value.

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  1. Tim – Enjoy the posts. Keep them coming. As always and you bring up a couple of great discussion points and interesting perspective. When you get down to it the term ROI can be frustrating because so quickly it clouds the measurability of an initiative, campaign, tactic, etc. ROI doesn’t necessarily need to be nor can it be measured on a lot of things companies (and especially in mktg) do. Screw the ROI speak alltogether (and I’m a finance guy)- at the end of the day I want to know we’re doing something because we’ve got very clear consise objectives and goals. I don’t need a big long ROI presentation to tell me if a program is working or improving or not. At the end of the day I want you to tell me what the objectives are, what you’re going to do to accomplish them, and how we’ll be able to measure that to determine the effectiveness. Give me that and THEN maybe we can START talking ROI.

  2. Pingback Gilligan on Data by Tim Wilson » So, You Think Measuring Marketing Performance Is Hard?

  3. 15/05/2009Muy interesante, Manuel. Yo veo que me1s que halbar del modelo de madurez de Web Analytics cubre el modelo de madurez en la Toma de Decisiones basadas en Datos . De hecho, menciona el libro Competing on Analytics . En ese libro Davenport habla de dos conceptos complementarios: Analedtica en procesos internos y Analedtica en procesos externos. La Analedtica Web entrareda principalmente en este segundo grupo, pero la pire1mide de madurez encuentra la integracif3n de ambos muy cerca de su cima. Todo ello demuestra que la Analedtica Web, por sed sola, se limita a cumplir una funcif3n limitada de gestif3n de campaf1as e identificacif3n de patologedas (de cara a mejora de la conversif3n y otras importantes metas, sin duda). Pero su gran potencial como fuente de conocimiento del cliente, estudio de mercado, desarrollo de negocio y planificacif3n estrate9gica este1 fuertemente vinculado a su capacidad de integrarse en ese gran escenario de Data-driven Decision Making .

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