If you’re a top-line guy or gal and all you want out of this post is the short answer to our headline, well, here you go: You can’t.
But you don’t want to stop reading just yet. Because rather than solving this marketing challenge, the answer shines a spotlight on the root issue:
Despite mounting pressure from the C-suite to demonstrate financial results, qualitative metrics are still how most marketers (50.7%) show impact.
According to recent study by Gartner, “CMOs across North America and the UK say awareness is the most important metric to inform their marketing strategy going forward.”
Awareness ≠ Sales Revenue
Awareness is a step along the buyer’s journey, but it’s not the destination; purchase is. And, increased awareness is not an accurate indicator of revenue growth.
Focused on a currency that pretty much only we care about, the marketing profession has wasted valuable time, resources and credibility trying to convince our cross-functional counterparts of the value of awareness. It hasn’t worked.
It’s not that marketers don’t recognize that other currencies exist, like profit and market share; they just don’t value them as highly, so says the recent Gartner CMO Spend Survey:
“When asked to define the most important metrics on their marketing dashboard, CMOs cited ‘awareness’ as the most important, beating ROI and measures of customer value and customer satisfaction (CSAT).”
Out of step with the rest of the C-Suite, marketing’s focus has only served to widen the communication chasm between CMOs and CFOs that we’ve discussed here before.
The silver lining to this ominous-sounding cloud is that change is on the horizon, made possible by technology-powered algorithms, machine learning and data science. It is now possible and accessible for most brands to measure marketing in the currency of business (yep, money).
Why ROI Must Die
When marketers show an affinity for financial metrics, ROI is their go-to choice. And why not? It’s tangible and quantitative, right?
Yes, ROI is more quantifiable than awareness, and it is measured in dollars—a helpful start. But as typically calculated, ROI is completely focused on the one thing we know for sure you’ll never be able to change: the past. And most ROIs only calculate a financial impact over 12-16 weeks, which shortchanges most equity-building programs.
If you’re trying to make million-dollar decisions on your marketing mix, referring to data that’s a year or two old is not a very helpful or savvy approach. Even when you have clean data, which admittedly most of us don’t, you can be pretty confident the year ahead, and its opportunities and risks, will be things you didn’t know existed a year ago.
Basing everything on historical benchmarks then becomes, quite literally, a backward approach to planning future success.
Too many marketers ignore this reality and view any positive ROI as a win: Get a return over $1 (or at least higher than last year’s). Rinse. Repeat..
This happens over and over again among marketers who are in charge of the $1 trillion now spent on consumer brand marketing—without consideration of changes in timing from season to season or changing circumstances from year to year. Even worse, many are willing to accept a low ROI as unchangeable, just the way things are—simply because they’ve lacked the insight, and thus the ability, to change it.
The Future is Here and It’s Called mROI
So what’s a forward-thinking CMO to do?
Be sure to check out next week’s post where we’ll introduce you to the new, forward-facing metric for making winning decisions about your marketing mix.