How to Measure ROI in Modern Marketing
Many of us veterans of direct marketing look at the brave new world of modern marketing and find ourselves overwhelmed by digital speak, technology, quantitative methods, and artificial intelligence— much less how to measure ROI. In a recent interview with global management consulting giant McKinsey & Company, Libby Chambers, Chief Strategy, Product and Marketing Officer at Western Union, says:
“I’ve spent most of my career in direct marketing, so for me, some of the science has just been rebranding stuff that people in the credit card or the publishing world have been doing for 50 years. But I do think that the cost of data has come down, the cost of the tools has come down, and the level of ‘real-timeness’ of the information has gone way up.”
This got me thinking: many marketing veterans are hesitant to tread into modern marketing because they think it’s new. They believe somehow that technology, especially digital technology, has changed the fundamentals of marketing and that unless you know HTML and Google Analytics, it’s difficult to make headway. Libby Chambers has a different view. Fifty years is the time window she is talking about, and she sees that a lot is still the same.
How to Measure ROI in Modern Marketing
Below is a summary of a project she conducted to measure the ROI in modern marketing. Her experience reveals that the business of marketing is still fundamentally the same, but yes, you do have to learn some new tricks.
Check your marketing efforts against these highlights and you might discover that the new way to do marketing is the old way on technology steroids:
- Are you thinking like a CFO with numbers? The investing metaphor is apt in that there are many different places where you can spend your money—countries, channels, products, and customer groups. So how are you allocating your marketing dollars? The marketing discipline has evolved to where being quantitatively rigorous and having as much financial acumen as the finance people has become really important.
- A crucial aspect of the entire process was the creation of test-and-learn discipline. Testing anything means you need measurements. Everything measured was broken down into two elements: efficiency and effectiveness.
- Efficiency: consolidating the agency roster, running rigorous RFPs, negotiating commercial terms with all agencies, getting better at understanding costs and being very precise about competitively bidding out work.
- Effectiveness: improving targeting of digital-media buy, understanding where ROI was best, examining research activities to avoid duplication and to ensure building and sharing of knowledge.
- Measuring ROI takes time—but not too much time. This project took eight to nine months. Chambers’ team developed around 50 different measures that they have been able to put in place and are now tracking.
- The captured savings go into a “pot” where it is measured and then redeployed to a series of growth projects.
- The budget is now aligned, not on a percentage-of-sales basis, but on a much more sophisticated, what-are-we-actually-getting-on-our-return basis for that marketing spend.
If you look at the interview in this stripped-down manner, you might think: that’s basic. What’s new about it? And yet it’s kind of project the head of Marketing at the Western Union, a $5.4 billion USD company, undertakes and discusses with a progressive consulting firm.
Back to Basics
Well, it is basic. As Chambers points out, technology has helped marketing processes move faster and at a more granular level—both of which we wanted when we started out in marketing. Now we have this technology, so become friends with it and get back to the trenches. Deploy some math and finance skills to deliver your marketing solutions. One good way is to take every marketing step you follow and re-imagine it with how technology and financial skills can be used to do the same step. And you don’t have to be a math or finance whiz for this, you only need somebody on your team who is and then ride the dragon.