The Fallacy of Return on Investment in Marketing
Return on investment in marketing cannot be measured accurately. We are fooling ourselves if we think it can. The main reason ROI in marketing is virtually impossible to measure is that most actions from marketing are not instant and many actions from marketing are caused by a cummulation of impact over a period of time.
Do you buy a Nike shoes because it is on the billboard; because you saw the ad on television; because you saw the billboard; because you like the Just Do It slogan; or because the store clerk suggested them? Was it the ad this month or last? Or was it the ad you saw when you were 12? Or is it the recommendation of a friend who had been impacted by Nike marketing?
The answer is - you probably don't know exactly why you buy the shoes at the particular time that you do. It is a combination of all these factors that make up marketing that cause the consumer to take action.Most likely the purchase was made due to a combination of factors. That is why all marketers preach multiple medias and multiple frequencies. Marketing effect happens over time.
Marketing is the battle for perception. Good marketing can create the perception needed to cause purchasers to buy. It can also create the warm feeling towards the company or product that prompts the purchase.
The only type of product that can have an instant return on investment in marketing is something that is truly commoditized.
If you are selling water and there is no perception that your water is any different than anyone else's water, then if you do a marketing campaign or a promotion or a price reduction, you can shift share from a competitor. Most manufacturers should actually be spending their marketing dollars differentiating their product. It is much easier to sell "Clean Glacier" water over "bottled city" water if Clean Glacier can sell the refreshment and health benefits of their brand. Even water is not a commodity.
The only companies that should want to commoditize their markets are ones that are truly the lowest cost to produce (not to be confused with lowest price). To sell at the lowest price without the lowest cost is a recipe for failure.
Because of the difficulty in measuring ROI, some companies will just stop marketing. This is great news for those that keep marketing. In time share will shift to those that continue to invest.
Just because ROI in marketing is impossible to measure accurately does not mean marketing has no value. Just because we desperately want to know how to measure ROI in marketing does not mean it can be done. And just because the measurement is not accurate does not mean we should not try to measure it.
