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In marketing, “What” and “How” you measure is a factor of defined goals and available data.
Sometimes a marketer’s goal is to meet certain non-financial objectives such as increased awareness or customer registrations. In these instances, these measures should be referred to as Return on Objectives (ROO) rather than Return on Investment (ROI)—which is a finance term that implies a financial return on a specific investment. Of course, all marketing activities should eventually be linked to some form of ROI measurement. The question is which kind. Is your stated financial goal to increase stock price? Profits? Quarterly sales? Cash flow? Customer value? EVA? Etc. It would be ideal if one could opt for all of the above. It is important to keep in mind, however, that these are realized over different life cycles and measured with different methodologies. Furthermore, using more than one or two ROI benchmarks often leads to organizational misalignment and loss of strategic focus. Achieving organizational alignment is one of the most important steps towards creating marketing that can be measured. Marketers should focus on developing the that services span the mediation and group discovery efforts that lead to alignment within an organization, as well as the more quantitative back end measurement strategies and implementations. At any rate, once goals are clearly articulated and agreed upon, the entire marketing measurement challenge becomes clarified.
A quantitative model is only as good as its data input. We are all familiar with the phrase “garbage in, garbage out.” A metrics model must be appropriate for the kind of data available. For example, if your company has extensive customer data collected over long periods of time, a comprehensive ROI model can be put in place. However, if these data are not available a different, less precise, model would have to be developed. Even with extensive access to customer and market data, it is important to qualify the quality of these data. A simple ROI formula that can be applied to all businesses across all industries does not exist. Metrics models must be tailored to each corporation’s business model and corporate strategy to deliver information that is relevant to the defined goals. Such models can and should be developed.