In this article I comment on a growing pressure for marketers: proving the ROI of it. First I touch on differencent definitions of marketing, as that obviously matters first. Secondly, Marketing ROI isn't only a marketing department issue and finally I touch on some concrete ways to measure ROI and how the organization can befenit from it.

1. Unravelling ROI <br />Everyone could be a great marketer, if it was easy to measure the ROI of marketing investments. <br />Greatness is not for everyone because, even when thorough analysis has been done, a large part still depends on judgement, experience, vision and creativity. It is difficult to isolate the factors and influences, there is no formula for success. <br />On top of that, the marketing game is rapidly and surely changing to increased fragmentation on the consumer side and increased choice of media to involve consumers on the media side, making it even harder to assess the effect of each component. <br />Despite this complexity, marketers are increasingly being asked to provide the ROI of their activities. The time that millions of dollars were invested behind a TVC, just because the MD said so are over – for most companies. <br />However, ROI of marketing spend is not just an issue of the marketer, to measure the ROI of marketing the whole company must be behind it. <br />1. Role and importance of marketing in the company: What is it that marketing is set out to do? And to what extend is the marketer is in the driver’s seat of his own results?<br />Firstly, the discussion about ROI is diffused. Most professionals will agree that securing payback and improving the ROI of the company’s investments and assets is a primarily a marketing job. It’s the marketers job to create higher revenues and thereby increase the profits. However, when they speak of ROI measurement, it is mostly related to measuring the return of investments of advertising and promotions, a much more tactical definition. <br />Measuring ROI and defining the appropriate metrics, starts with clarifying the role and importance of marketing to the company. <br />There are two reasons why marketers could say: ”Don’t ask me for ROI, I have no control over it”. Firstly, the way global, regional and local allocation of roles and responsibilities are allocated. Locally marketers may feel they’re merely executional, while globally marketers may be in the drivers’ seat. Secondly, and more fundamentally: is the organization truly market driven with marketing driving business strategy or is the role of marketing seen as keepers of the A&P budget? Is marketing building the stage for success (positioning, product development and strategy) or is marketing seen as “making sure the sales people can sell”. Is marketing seen as an investment or a cost. Paradoxically, in the second scenario, the marketer may be under more pressure to prove the ROI of his efforts, while he has actually less control. Clearly, measuring the contribution of marketing on the company’s ROI requires different metrics as measuring the ROI of the A&P investment. <br />2. Align the rest of the company: systems and processes should support ROI measurement<br />Does your finance management reflect reality, or do you adapt reality to fit the finance management system and views? In many companies, it is the second scenario. In one concrete case, the companies’ finance system used ATL cost codes and BTL costs codes separately. The marketing department however, was already working “through the line”. Finance also implicitly assumed that BTL, meant sales driving, ATL brand building. Budgets would be allocated accordingly among sales, trade marketing and marketing. Marketing was working with today’s knowledge that brands can very well be built BTL, and certainly everything done BTL should contribute to brand equity and be aligned with the ATL activities. However, if it would have been up to Finance, marketing would have just been able to work with the ATL budget. With this type of misunderstanding, it will be impossible to measure ROI effectively or use the results effectively. So, you must get the support system and processes to mirror practice and priorities, not vice versaBudget management can further support by providing project based costing, rather than account code costing. Largely automated, real-time and project based finance systems are still exception rather than norm. On-line project based costing systems can provide easily available, real time information to managers and executives. Most importantly these systems can provide an overview of cross departmental investments. Many case examples can be found on: www.consumergoods.com. Only when all the costs are accounted for by project – ideally including internal costs such as time spent - an ROI analysis comes close to reality. <br />3. Set the Metrics and learn<br />Based on a clear definition of what it is marketing is set out to do and an integrated support system, now metrics should be agreed upon to measure marketings’ ROI. Not only measuring what are the most cost efficient ways to achieve a maximum of short term sales, but also leading to a situation where marketing knows which direction to go to create more value for the company.<br />Mr. Reichheld advocates: Measure the Net promoter Score, based on by asking consumers the simple question of; “How likely are you to recommend this product to a good friend?” In the now classic book “the Ultimate question” Mr. Reichheld makes a compelling case for measuring just this, in stead of the usual battery of measurements. <br />Metrics of marketing in the more tactical definition have to do with executional excellence and are therefore not less important, just of different nature. How to measure the effectiveness of the design of a car showroom, how to isolate the effectiveness of promotion girl in a coffeeshop among other promotional tools, how to measure the difference between putting an ad in the news paper or having an on-line application. Each item can be linked directly to incremental sales or value – if you’re able to test it in isolation. It requires great effort, but especially the chocolate and the cigarettes companies have come a long way. The next important question is how the company can develop benchmarks as to learn each time they execute, each time they spend money. This is really a matter of creating benchmarks that are related only to executional excellence – not directly linked to sales - and discipline. The discipline to always measure what you do, in standardised terms and to log that so that it remains accessible. The book: “Measuring Marketing: 103 Key Metrics Every Marketer Needs”, by John Davis, provides a practical overview of key metrics.<br />Stifling?<br />Does all this ROI measurement lead to slow and stifled companies? Yes, if done in the wrong spirit. If it is done as a control measure from top-management to bottom, it will lead to junior managers following the rules and the quantitative measures. If it is done in the spirit of empowerment “these measures are the boundaries and minimum requirements, within that you can decide and learn”, it will lead to faster, lower level decision making, having a learning organization and improved motivation through-out all levels of the company. <br />