Friday, December 16, 2011

Marketing function metrics ROM, ROMI - you are lost man

One of the easiest acid tests for marketing, not marketing function, are the metrics. Metrics show how you define marketing. Maybe the worst inventions ever are "Return On Marketing... ROM" and "Return On Marketing Investment... ROMI". When you set those in place you nail as well marketing to be communications aka advertising driven - not to build and nurture customer value. Communicating customer value is world's apart from creating customer value.

ROM and ROMI must have been invented by people with ad agency background. Idea is worthwhile - to make marketing measurable but problem lies somewhere else. Those companies which need dedicated metrics for marketing haven't integrated marketing to business model. Business and managing business is considered to be something else. Revenue metrics are not considered to measure marketing efforts.

ROM and ROMI metrics measure impact of campaigning. In other words you burn money to buy advertising space, materials and actual ads to influence brains of all of us. Unfortunately this is just a thin slice of marketing. Communication is communication not marketing. Many companies have a tight marriage between marketing function and ad agencies. Ad agencies make their money from manufacturing ads. Marketing function buy these ads not support for customer value creation. Internally marketing folks complain why they do not get respect. More likely they should get fired or the person who defined marketing to drive only communications.

In yesterday's world above definition of marketing was just fine. After we got Internet and all the digital opportunities it is no longer "just fine". Companies operate in a very interactive world where every company should define how to utilize opportunities of Internet. Traditional marketing takes Internet just as a new media to promote the company and its products. Social media is in here just a new advertising media. If curriculum of people in marketing has been filled with ad driven marketing for the last 15-20 years - old dog cannot learn new tricks. It is like Kotler trying reinvent himself after preaching 4Ps for three decades that now customer is the starting point.

To change old habits companies  now hire digital natives/Y-generation/less 30 years people. Whole idea is absurd. These young guys without any formal power should teach senior staff about Internet whilst they have very little understanding and experience from running businesses. Sounds like old school of management. Senior management equals to parents and personnel are their children. Parents absorb ideas from children like at home but decide what to do with them.

So yes you should hire digital natives but they are powerless until there are people in senior roles who have power to set direction. People who have both: insights, foresight and vision of utilizing Internet for betterment of business combined with years in managing businesses.

Back to measurement and setting fences for the marketing function. What if your marketing would be integrated with business development? Not sure if you have a function for it but at least on the plans you should have ideas how to develop your business. Once you integrate ideas of marketing and business development (read integrate not bundle) ROM and ROMI metrics make no sense. They make sense for their origin - to measure communications not marketing. Business development centered marketing is measured with revenue generation metrics, brand equity, customer value delivery, channel sales mix, loyalty, share of wallet,... all metrics which have tight connection to revenue creation. Not bad and once marketing equals to business development conflicts and grey areas between sales and marketing can be solved as well (next topic?)

2 comments:

  1. thank you, any further ideas?

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