Campaign ROI Is No Longer Enough
Campaign ROI Is No Longer Enough
Savvy marketers today are transforming data into knowledge used in decision-making. But if a little knowledge is a good thing, more is better.
Consider campaign ROI, a classic measurement that many marketers use to compare what was spent on a business activity and what revenue or profit was generated. So far so good, but you need to delve deeper.
Classic ROI on a marketing program or campaign tells you something about the revenues generated by a campaign—and if everything was that simple, all of the revenue attributed to a campaign would provide a clear understanding of its effectiveness. This would mean that a revenue dollar came directly from the campaign and no other factors influenced that spend. If only this was true.
In reality we all know that marketing campaigns are leaky, and that is a very good thing. A campaign might generate revenue immediately, but more often than not, the campaign influences the deal because it prepares the prospect to take advantage of an offer from a follow-on campaign. You can see this more clearly with baseball.
If you have two solid hitters, a good strategy is to make them numbers three and four in the batting order. Often a pitcher might elect to walk, i.e. avoid, a good hitter in the hope of getting to the next guy who may be an easier out. But in this case, if you walk number three you have to pitch to number four—otherwise you're just walking the bases loaded and then you have real problems. So the presence of number four gives number three more chances and, being a good hitter, number three will respond with more hits. This is a tough situation for the pitcher who, therefore, has to be on his game for both batters.
As a manager in baseball, over the course of a season you can run A-B tests to see the effects of your batting order strategy. To get really concrete, when David Ortiz batted third and Manny Ramirez hit cleanup the Red Sox won two World Series titles.
Marketing campaigns are like the batting order to a degree. One campaign can influence the next one down the line.
But campaign ROI misses all this. Campaign ROI was a great idea; it still is. It got us to think differently about marketing and how to quantify what was often qualitative. But it's not enough. To get an apples-to-apples comparison in marketing you need to develop the idea of campaign influence. How much downstream influence can we attribute to a campaign beyond its ROI?
When we're able to attribute influence to different campaigns we can more clearly see that some campaigns are more effective with specific products, offers, and customers. And once that happens we can tailor campaigns for better results. The A-B test is no longer this or that, but this or that in which circumstances? Under what conditions?
This turns marketers from gathering data to massage into information, to using information to produce knowledge about customers inside of a sales process. Campaign influence might tell you, for instance, that prospects who have been exposed to certain campaigns close faster, a valuable thing to know in the middle of a quarter when you need more revenue.
It's like when we had David at bat, Manny on deck, and a runner on second. Odds were good that the runner would be crossing home plate soon. I just love baseball, er, I mean, marketing.
|Denis Pombriant is founder and managing principal of Beagle Research Group LLC. His research on such topics as social CRM and social responsibility is widely read in North America and in Europe.|