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Why they still don't see eye to eye on measures of return.
Joseph McCafferty, CFO Magazine
May 1, 2007
Companies are still struggling to measure their returns on marketing investments, and two recent studies shed some light on why. For one thing, marketing and finance disagree as to how well current programs to measure the ROI of expenses such as advertising and direct mail actually perform. At many companies the two functions do not work together to develop measures; sometimes they battle one another.
One study, by Marketing Management Analytics (MMA), finds that just 7 percent of finance executives are satisfied with their companies' ability to measure marketing ROI. A higher portion of marketing executives, 23 percent, think they are doing a good job of measuring returns.
"Marketing executives are under a lot of pressure to show exactly how investments in the brand translate into sales," says Ed See, co-president of MMA. He believes that chief marketing officers who still think marketing is about brand awareness, with only a loose connection to the bottom line, won't last very long in their jobs.
Some industries are way behind others. A survey by Lenskold Group finds that companies that sell through retailers are almost four times more likely to measure marketing ROI than those that sell through a sales force (39 percent to 11 percent). Jim Lenskold, president of the firm, says packaged-goods companies pioneered marketing metrics in the early 1990s and are well ahead of most industries, but many others are now developing programs. Nonetheless, "I'd say most programs are in the toddler stage," says Lenskold.
Lack of cooperation between marketing and finance is also hindering efforts to develop ROI measures. Just 19 percent of the finance executives surveyed by MMA report full cooperation, while more than 8 percent report frequent conflicts with marketing over budget and strategy and another 13 percent report no meaningful relationship at all. While these results provide plenty of fodder for Dilbert comic strips, they don't bode well for the creation of useful marketing metrics.