Marketing ROI is the favorite metric for Finance and the least favorite metric for Marketing.
At the same time, ROI has become an obsession for some people in Marketing Research. Without downgrading the role ROI or media efficiency plays in making the right decisions for growth, I am making the case here about the bigger role effectiveness has in the brand growth trajectory. This way you can keep your CFO happy while thinking about brand growth not cost rationalization.
Positive Marketing ROI is table stakes
Similar to a table game at a casino, a positive ROI is the minimum entry requirement to play in the advertising game. Yet, we often think ROI is enough to end the measurement conversation.
Take the example of the “cheapest media in the world” standard banner display. Yes, the one everyone decides to ignore or block all the time. Display Banners are so cheap that sometimes, by converting a ridiculously small number of consumers to purchase your brand, it yields a break-even ROI. Compare that with the highest quality online video available: it’s expensive but converts 10x more consumers than the display banner. But if it’s simply 10x more expensive, it yields the same ROI.
Which would you choose?
For me, the largest conversion, or sales impact, will always win. Just because a higher conversion will accelerate the growth of your brand faster. You could theoretically grow your brand with display too, but it might take you at best 10x the time to achieve that impact. And more risk along the way. Let’s not get into ad fraud, ad-blocking, erroneous clicks, and more.
Marketing ROI in times of crisis
ROI is a reflection of both your creative asset and your media cost. During 2020 – in COVID times, as some advertisers stopped digital investment, we saw significant shifts in CPM decline, on major digital platforms. The shifts caused artificially improved ROIs. Are the consumers responding differently to your advertising? Probably not.
Is ROI simply changing because of market conditions beyond your control? Probably. That’s why I think looking at effectiveness first is a more consumer-centric approach.
Small brands suffer from their lack of scale in any Marketing ROI measurement
At Mars, the consistent fixation with generating a higher sales uplift enables longer-term growth strategies for small brands.
When your brand scale is too small to even dream of a positive ROI short term, the only path forward is to maximize conversion. With time, you will command a higher ROI if the sales uplift standard remains high.
Looking at only ROI, it could be seen as irresponsible to invest in smaller brands with a great future outlook, and Finance will sweep the table. But focusing on creative excellence, and building an internal culture (in the way ABInbev explained here) is more important than you think.