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Marketing without measuring Marketing ROI is casualty

Recently I read an article on “Indian FMCG industry”, the article talks about lavish marketing spends in FMCG. This year marketing spends growth was twice that of the sales growth in Indian FMCG industry. In one way this is good news, Marketing is being given importance but unfortunate thing is that they are running towards a big disaster without measuring ROI on Marketing. Marketing was considered as a function which doesn’t provide any value addition when compared with its sibling sales. It is considered as a cost center.

The primary reason being sales talks about numbers where as marketing talks about indiscrete aspects like brand value, awareness, and so on. Sales team has competition from competitor’s sales team, however for a marketing team; the competition is both internal and external. They have to compete with sales for getting resources as well as with competitor’s marketing divisions. Without proper ROI marketing can never win against sales, as sales show the numbers. Management at CXO level, look more at numbers like sales, revenues, profits, margins than brand value or awareness. That’s the reason during the times of recession or any financial crisis in a company; marketing budgets are the first to get a cut in most of the companies. 

Such spends on marketing without proper ROI will definitely lead to a disaster both for the company as well as the marketing division. The company will incur lot of expense due to extravagant marketing  spends and the plan’s objective might not be achieved due to several reason most important of them being  wrong timing and indifferent customer. Let us assume that most of the marketing spends are on promotion campaigns where discounts are being given, but then the assumption that “customers will buy when discounts are offered need not be correct always”.  For the marketing division such spending without proper returns will lead to loss of trust by senior management and in future whenever there is a conflict between sales and marketing for resources sales will always win. Hence it is more critical for marketing to be more cautious in their spends and more accurate in measuring the marketing ROI.

Coming to where and how to measure the marketing ROI, one area where marketing can talk about numbers is leads, but sales team has a conflict with marketing on the good lead and bad lead or rather not a lead. To an extent it is true that marketing team will pass on all the responses for a marketing event/campaign as a lead to sales team, but how many of them are true leads? Hence there should be a common understanding between marketing and sales for qualifying a lead as good lead. This helps in measuring the campaign ROI more accurately. Marketing divisions should plan in such a way that each penny will result in maximum returns and then measure the ROI to show that marketing spends are driving sales.

Marketing organizations in a company should follow closed loop marketing process for measuring accurate marketing ROI. A closed loop marketing process where sales targets and marketing targets are used for marketing planning, marketing events, programs, campaigns are planned based on marketing plan and the marketing responses are properly segregated and analyzed to arrive at the ROI of the marketing events and finally this data is used for marketing planning in the coming financial year / quarter. Since each action is identified and each response is captured it is accurate and easy to measure the ROI and show the benefits to the management. A good CRM implementation can help in arriving at marketing ROI.

CRM Software’s have inbuilt closed loop marketing process with industry best practices imbibed in them, but there are very few implementations which have implemented the closed loop marketing process. Most of the marketing implementations are constrained to campaign management, or marketing resource management, etc. Unless response capture mechanism is in place and proper reports and analysis is done marketing ROI cannot be measured properly.

I will touch upon how CRM can help in enhancing marketing operations and measuring ROI in my next post.

Comments

Vamsi, Good post. This (measuring marketing ROI) is one of the major concerns for most of the Indian businesses. This is primarily because of lack of closed loop systems/processes which can track right from the lead generation thru the marketing campaigns/promotions to the conversion of these leads to sales. There is no targeted campaigns at this moment. Most of the campaigns are mass campaigns and there is no tracking mechanism to measure the campaign effectiveness. I think a good EMM (Enterprise Marketing Management) solution can address many of these issues and can help organizations to measure the marketing ROI and justify the presence of marketing.

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