Marketing ROI: time for a 'no excuse' policy.

At the age of “real time marketing”, “marketing automation” and other “big data”, at a time when technology is supposed to propel marketing into the era of accountability and predictability, most marketers still have trouble answering the fundamental question of marketing ROI. Surveys after surveys, this disgruntling fact gets confirmed and several root causes can be identified. This post explores one of the main ones:  the perceived complexity and challenges of marketing mix modelling (MMM), a proven approach to help companies identify the drivers of their business. This post explains why this perception is quickly getting outdated and will soon appear as a wrong excuse for lack of accountability.  Indeed, a new technology enabled approach to MMM now brings untapped opportunities to marketing departments genuinely interested in assessing and optimizing their ROI. In addressing the key challenges of traditional modelling, this approach has the potential to bring full accountability at the core of the marketing practice. It’s time for marketing to notice, step ahead of the curve and drive a no excuse policy to marketing ROI – anticipating on the expectation of the C-suite.

The litany of 'gut-feel' marketing.

Year after year, different surveys point to the consistent lack of understanding of marketing ROI by most marketing departments. Just a few examples:

•      In December 2012, a research amongst UK marketers showed that they were throwing away billions of pounds a year in spend by relying on gut instinct and guesswork, rather than data and rational decision-making.
•      In that same year, a report identified that 70 per cent of CEOs believe marketers lack credibility, because they cannot prove the business impact of marketing.
•       At the end of 2013, the annual CMO survey run by the AMA has shown that only 1/3 of US marketers can prove the marketing impact quantitatively.

And so goes the litany of gut feel marketing. Despite reports after reports alerting to growing discontent and mistrust among the C-suite, the bulk of marketers continue the same old “spray and pray” approach. And pinpoint to the challenges and complexity of approaches like marketing mix modelling to justify the lack of a rigorous ROI measurement.

Looking at the excuse: shortcomings of traditional marketing mix modelling

Marketing mix modelling (MMM) is a well-established methodology to rigorously assess and model the impact of important marketing variables (e.g. media investments, promotions, pricing…) on key performance indicators (e.g. volume sales, customer acquisition, qualified leads…). For savvy modellers and marketing departments (like consumer package goods), the approach is proven, well understood and drives actionable insights when combined with business acumen.  Yet, outside of what can be described as an insiders’ circle, the reputation of MMM is not quite at par with the value it is supposed to deliver.  As a matter of fact, quite a few marketing departments that have genuinely embarked into MMM projects have been somewhat disappointed. The root causes of the shortcomings usually trace back to a combination of different factors:

•      Time required by the end-to-end process, which often involves several weeks of data gathering and validation prior to a few additional weeks for modelling.
•       Lack of flexibility, as any further question or new data set will require another few weeks of modelling after the first results.
•       Lack of transparency, as model assumptions are rarely fully disclosed or understood, leading to sometime limited internal buy-in.
•       Low scalability: due to the above challenges, modelling gets done only once or twice a year at best, primarily for major brands and/or regions. Its potential impact on marketing optimization remains therefore limited and in the end its cost-to-benefit ratio gets questioned. 

     Despite the robustness of its methodology and its potential positive effects, MMM in its traditional form has some way to go to become part of a standard marketing toolkit.  So far, its impact has remained somewhat limited to the marketing teams that can afford the resources, skill sets and budgets to overcome its challenges. And for other marketing departments, perceived shortcomings or actual experience have provided reasons no to move.

No more good excuse: the technology enabled approach to MMM  

So, how to address the above challenges? As often, technology can step change the way  old questions are handled. A great illustration is the modelling application developed by marketing software firm marketingQED. Armed with sales data and details of recent marketing activities, the marketingQED software can run thousands of potential models in a matter of minutes. It uses data visualizations to show when and where marketing activities are most effective, giving the user, even if non expert,  the power to adjust and forecast accordingly. What would require several days, even a few weeks, now becomes available after a few clicks and the time for a coffee. So how does this new modelling capability transform the MMM experience and output capabilities? Let’s look again at the above issues one by one:

• Time required: getting the appropriate modelling output in just a few minutes means that insights can be obtained straight after data validation. Combined with a streamlined data management process, ROI optimization gets close to a real time, always on capability, in line with today’s marketing expectations. 
• Flexibility: multiple insights and questions can be explored, thanks to the speed of modelling. Modelling is no longer about one unique overarching Truth, always arguable, but about fruitful conversations among stakeholders, which drive buy in and alignment.  
• Transparency: all assumptions can be spelled out, different ones can be explored if necessary and get assessed via sound business logic, because the modelling exploration is always conducted in the presence of the final marketing user.
•  Scalability:  modeling requirements can scale up to different levels of complexity because the marginal cost of each new modelling project lowers along the learning curve

So time to move on and realise that yesterday's acceptable reason is becoming today's wrong excuse.  Companies that engage into systematic assessment and optimisation of their marketing ROI will ripe very significant benefits, as proven by several studies. Until recently, this incentive was somewhat counterbalanced by the perceived cost in terms of time, resource, skill-set and yes, money. One big roadblock is now out of the way: ROI modelling has the potential to become a marketing routine, independently of the type of industry, level of expertise or budgets. This is a great step towards accountability. For marketing, a 'no excuse' policy to ROI measurement and optimisation should now be the only acceptable policy

Marketing ROI: towards the end of marketing as bullfighting.

Trying to answer the delicate question of ROI used to bear, until recently, a significant risk for the Marketing function, and for thrill seekers, an opportunity to exhibit talents resembling bullfighting, due to the fearless cleverness and agility required to circumvent the question. With the risk of disappointing aficionados however, it is now time to put the muletas back into the closet, to leave the arena and adopt a 21st century marketing  practice: one where the marketing measures its effects, compares them, optimizes them, is accountable and eventually invited to the board room. Indeed, innovative modelling tools now exist that can actually step change the situation and offer real time measurement and ROI optimization to any rigorous marketing department, in a simple, flexible, affordable and effective package. Marketing as bullfighting is over. Marketing Modelling has at last entered the twenty-first century!

What marketing and bullfighting have in common...  

Let’s go back a few years. The issue of ROI has been haunting marketing departments since the beginning of the function, like a ghost question looking for its answer ... Of course, some departments, ahead of their time, had been able to figure out some answers, with rather complicated and expensive tools. But in most cases, anyone asking the question of ROI was unwelcome and showed concerns deemed irrelevant to marketing, as they had to do with this mysterious and somewhat trivial area also known as finance.

Then would come in play the art of the “bullfighting-marketer.” A unique art which consisted, through a few well executed muleta tricks, in softening up and taming the importunate questioner to send her back to her office and spread sheets, to the applause of less experienced, but keen to learn fellow marketers. Abundant mumbo-jumbo, arguments about long term effects, so difficult to measure as everyone knows, "soft metrics", intangible qualitative factors, supposedly much more telling than the trivial figures, anecdotes… everything at hand could be used. And the unwelcome one, baffled by the style, the figures, the variety of arguments and assertions whirlwind, bewildered by such maestria, would retreat, forgetting the original question as well as the way back to the office and its spread sheets. The feared question was circumvented, the ghost would continue to wander, if possible for a few more centuries, and marketing would get back to its more noble concerns.

 

How typical answers miss the point

Needless to extend the metaphor any more. Indeed, the heroic (and fictionalized) gesture of marketing dealing  against finance injunctions is coming to an end. And the legend will lose what the function gains in terms of credibility.

Whoever thinks the above is a bit far fetched may consider the following example arguments, typically brought up to justify a marketing investment like an ad campaign:

-       "Our dealers love our new campaign"

-       "The feed back of the focus groups was unanimous"

-       "Our new concept will establish itself over the long-term, despite no visible immediate effect..”

-       "Our new campaign increased the brand awareness"

-       "Our image improves on the key brand attributes"

Interesting arguments without a doubt, and maybe relevant for some of them. But unfortunately these arguments miss the point, as they have little to do with the concept of ROI, and moreover don’t show any evidence of it. Yet, these are the typical muleta tricks which many marketers have been forced to use, for want of anything better. And short of being able to simply, rapidly and transparently demonstrate how much one invested Dollar would generate in terms of additional income and profit, and how to improve its effectiveness.

Welcome to the 21st century   

At the same time, the fact is ... the 21^st century started almost 15 years ago. The marketing literature is now filled with buzzwords such as "real time marketing", “marketing automation", "big data” and so on, and yet we should be content with the same aforementioned old, unsatisfying and approximate methods and tricks? Fortunately this is not the case anymore. Technology is also step-changing the way modelling is done and brings to any rigorous marketing department the most advanced ways to answer the question of ROI. Whoever thinks that Marketing Mix Modelling is still reserved to the most sophisticated marketing organisations, with apportioned budgets, should think twice now. By exploiting the new capabilities of intelligent and adaptive algorithms, a new technology offers flexibility, transparency and results almost instantaneous for the price of an annual license on a PC. It won’t be the final blow that marketers were looking for when they thought of marketing as a bullfight. No need for final blow any longer. What’s required are tools that enable the conversation across organisations, be it marketing and finance, marketing and sales or else. Tools that provide deep insights, make marketing fully accountable and transparent, and build C-suite credibility.  Such tool is out now and this is good news for marketers.

Welcome to the twenty-first century. And for aficionados, don’t worry: you can still plan a trip to Seville,