A Business Technology Place

Find me the money. Some practical thoughts on ROI.

Long before Jerry Maguire stated “show me the money” marketers have scrambled to show a return on investment, advertising, and marketing activities. But how well are marketers showing their stakeholders the money? It’s not a primary component of the marketing budget process according a survey review by Jack Neff of Ad Age. In fact, according to the survey, more CMOs rely on historical spending to set budgets than projected ROI.

But I don’t think that is necessarily a bad thing. A budget after all is just a plan for spending. The amount of spend required for services related to marketing is generally known by way of existing contracts, published price schedules, and yes historical spend.Geek and Poke ROI

So where does projected ROI fit into the budgeting equation? The answer is that the budget can be considered more than an exercise to control costs and plan to spend. It should also consider spend for *return as with capital projects.

Tracking and projecting returns on marketing efforts is not always easy and I’ll argue shouldn’t always be necessary. If the marketing activity is an ongoing event, then there should be some level of tracking available whether by electronic means or post sale surveys. Tracking helps forecast returns. New activities are more difficult because there is no baseline of activity from which to compare.

But digital and social media have muddied the waters on ROI calculations. In part because there is an abundance of data that can be measured and tracked and that creates noise to what is really important. But additionally because digital and social media create a web of consumer touch points that may lead up to a sale. Just how many times does a customer touch your marketing messages before they purchase? So analytics solution providers are increasing their ability to track Channel attribution as the technology creates more touch points before a sale.

So how does a marketer justify spend on activities for advertising, marketing, and engagement? First there needs to be an agreement that a component of marketing is trial and learning.  Sure marketers must eventually get to sound ROI and solid business decisions. But to get there requires some level of test and learn which could mean a negative ROI.

A typical marketing budget should contain three high level items: Advertising and Operations, Labor and Administration, and Trial and Measure (aka R&D).

Advertising in this case is for activities related to existing products and services. These activities are held to stricter standards for producing a return and marketers should use measurement tactics to justify the spend. It’s part of the run-the-business and go-to-market tactics used by the company to meet strategic goals.

Trial and Measure for the marketing department isn’t so much about the expense to develop new products and services for the company. That’s research and development (R&D) in the products area. Trial and measure allows marketers a chance to experiment, measure, learn, and adjust. It’s an important part of marketing and feeds larger money spend in the advertising area. It also helps to create forecast models for larger advertising investments. It’s the trial and measure area where marketers need a bit of freedom from all the pressures of ROI.

A great example of this is usability tests on eCommerce sites. Marketers can see big changes in key metrics by changing words, colors, or button locations on a web page. It requires programming time and thus an investment. But it’s usually these types of simple changes that find a respectable pay-off because they make purchasing easier for the customer.

Another example is merchandising techniques such as image location, image rotation, product reviews, etc. What works for Amazon may not work for everyone. It has to be tested with the specific products and services in the store.

So yes. Show me the money is a solid business principal. But let’s allow marketers to find the money first.

Channel attribution for a multi-channel world

We are multi-channeled consumers.
More and more we live in a multi-channel world. How many purchases do you research online ahead of the actual purchase transaction? If you are like me then your research involves multiple retailer sites, a search for promotional offers, and reading customer reviews. Digital media makes it all possible. It’s fast and you can do it from the comfort of your own home.

But sales channels are a marketer mindset. Consumers don’t think about channels when they are going about their daily routine ( and that’s a good thing for consumers). It allows consumers to be educated on not only the product they are purchasing, but the company who is selling the product as well. My experience is that in many cases the price of the product is roughly the same. But things like return policy, customer service, convenience of locations, or shipping fees could provide the greatest distinction between choices.

For retailers running a business all these touch points create a set of business questions. Which channel(s) receive credit for the sale? Which channel(s) should be allocated the most budget spend? How many channels did the customer touch before making their purchase? And so on and so on…..

Enter channel attribution to help marketers.
Internet analytics providers are starting to implement features for channel attribution.  I received a monthly product update email from Google that contained a link to their channel attribute support for Google Analytics premium customers and about four months ago I discussed the same features in the Adobe SiteCatalyst platform with some colleagues.

Marketers love attribution because it helps them understand how their efforts affect the entire sales cycle. This enables better decisioning for budgets, channels, promotions, and features.  What this means in practical terms is that all interactions with a customer are tracked for measurement. So for example interactions with email click-throughs, search keywords, promotional offers, etc. The big idea is to correlate all these interactions at the end of a sale instead of just looking at the individual purchase funnel of the last transaction.

Look for a set of niche channel attribution consultants.
Let’s be real though, channel attribution is a complex topic. It requires a significant understanding of how customers interact with channels and a great deal of planning to setup. Once it’s implemented the analysis of the data isn’t trivial either.

This will become a consultants paradise over the next few years. The capability will be closer to companies now that major players in the internet analytics industry are adding the feature to their tools. But the amount of planning required, the expertise to configure the tool, and the ability to interpret the information will be a barrier to entry for many organizations. They’ll need consultants.

This is making us all better.
The gradual changes will be good. Business departments at Universities and Colleges will begin to teach more about how channels coexist, not how they operate in silos. Some industry players now teach that the concept of a channel is outdated. They see customer interactions in touch-points. Businesses will begin to make smarter adjustments to budgets and technology use. Marketers will make smarter decisions for 1:1 marketing tactics with consumers.

This is the perfect area for marketing technologists to fit within an organizational framework. The technologists have a role in system architecture, planning, implementation, as well as operational support for measurement and analysis. It’s a wake-up call for organizations that marketing is becoming more dependent on technology and that technology is only useful if it’s helping marketing bring business to the organization.

Are you thinking about channel attribution in your marketing and technology plans?