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The failure of marketing ROI

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When a client calls and asks me "Does IDC have a tool for calculating the ROI of our marketing?” this usually means it is going to be a long day. What a logical and easy question to ask!  But it is SO hard to answer.

Determining B2B marketing ROI within the context of a long sales cycle has largely been a failure. But as long as marketing departments remain under considerable pressure to be accountable, this question is not going to fade away.  

Simple math can measure the results of simple marketing. One example is a single direct marketing effort. If I send mail piece X, I get 100 orders. If I send mail piece Y, I get 200 orders. Therefore, I should invest in Y. Because I know the cost of the mail programs (investment) and the resulting value (return), I can calculate ROI.

If the ONLY marketing activity conducted was the single direct mail piece, then an ROI calculation would be simple arithmetic.

However, B2B marketing within the context of a long and complex sale is not simple. The work of our marketing is the execution of multiple programs and touch-points that are "applied" against the capriciousness of human (or enterprise) buying behavior. IDC research shows that the entire process to create a new B2B customer can take 19 months, and includes multiple touches and activities from various marketing and sales tactics.

Compare our single direct mail example above to an actual marketing process that involves as many as 25 different media types (print, broadcast, digital, email, phone, etc.) over nearly two years. Even though mail piece Y works more effectively than X, the simplistic ROI model fails to tell the whole story. What role did ads play in getting the buyer to respond to either mail campaign? What role was played by the viral video placed on YouTube by a fan right before mail piece Y went out? What about the sales-call campaign that coincidentally occurred about the same time? Simple ROI fails to measure B2B marketing value because B2B marketing value results from the accumulation of effects over time. 

There is a danger in trying to use simple ROI to measure complex B2B marketing

Applying simple ROI models to complex B2B processes can result in dangerous conclusions.

Companies may overvalue elements that can be measured, such as direct response emails, just because they can be measured. And they might undervalue elements of critical influence, such as brand or customer loyalty campaigns that are not easily measured in a simple transaction. These companies can over-invest in “last touch” marketing tactics, such as product demos, only because they are most close to the actual sale and therefore can be more easily associated with it.

Is this as 'good as it gets?'

There is a day in sight when B2B marketers WILL be able to take a step forward in their quest to determine ROI. This will happen when our sales automation systems (CRM) link together with our marketing automation systems (MPM and MRM) and produce useful analytics. In this scenario, we will be able to compare the impact of specific marketing actions in different campaigns, by holding all variables constant (less one). With these data in hand we WILL be able to answer, or at least get closer to an answer to that question: "What impact did that trade show we did six months ago have on our pipeline?"

Someday!

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