Why You Shouldn’t Use ROI to Understand Marketing Value
Do you want better marketing?
It’s not a trick question.
By better marketing, I mean better than you did last year. Better than the status quo in your industry. Better than you’re executing today. Better than you’re planning for tomorrow.
By better marketing, I mean being strategic and intentional. Delivering a memorable experience with audience-centric content that speaks directly to your customers’ pain points and opportunities.
By better marketing, I mean crafting messages and campaigns built on customer insights that make your brand stand out, command higher prices, and impact the right people at the right time.
By better marketing, I mean leveraging budget and industry expertise to understand what’s working, what’s not, and why. To continually improve over time.
By better marketing, I mean best practices.
So I’ll ask again:
Do you want better marketing?
But, what does that mean?
It seems some teams just want more content filling more channels, more marketing qualified leads, more sales qualified leads, more sales, and more revenue—faster, cheaper, and more automated but they aren’t really interested in improving their marketing. They just want more.
And at the same time, they also want marketing to show a quantifiable return on investment–How many sales qualified leads did that blog produce? How much pipeline growth did your content add? How can you increase that number next quarter?
They want marketing to attribute every tactic, piece of content, and campaign to revenue–or else throw it out and start again. And while you’re looking over your shoulder, update your resume.
Unfortunately, this tug-of-war is happening every day in companies around the world. And it really comes down to a few polarizing questions:
How do you view the role marketing plays in your organization?
Does marketing have value in and of itself or is it simply a means to revenue?
How Did We Get Here?
I believe marketing has value outside of its ability to directly influence sales. Maybe it’s my background in journalism, communications, branding, and nonprofit leadership. But, I’m not alone.
More and more marketers are pushing back against the notion that what they do is a waste of time and money if they can’t directly attribute their work to revenue and accurately forecast future results. They’re being asked to guarantee return on investment; to make life easier on the Sales department; and to take the blame for “bad leads.”
But they’re not standing by quietly anymore.
How did Marketing become subservient to Sales? Having worked as a leader in both departments, I think it’s important to take a step back and understand several key problems in this relationship dynamic. If we can agree on these problems, we can also agree that we need a solution–a better way forward.
The Binary Outcomes Problem
The way we understand the world around us is often binary–an “either/or” expression of two outcomes.
Investing is binary. You put money in. You make a profit or you lose money in return. Gambling is binary for the same reason. [It’s amazing how much return on investment sounds like gambling]
Sales are binary. You win a sale or you don’t. You can’t kinda win a sale.
Manufacturing is binary. So is computer programming and chemistry. If you input A and B–you get C. Every time.
Most sports are binary. You win or you lose. [more on that later]
But, Marketing isn’t binary. It doesn’t consistently produce a singular win or loss outcome.
Particularly in long, complex (generally B2B) buying cycles, people have to progressively move from awareness to action, making stops at understanding, interest, and support along the way. It’s their customer journey. It’s our sales funnel. Both are stitched together by the way we market.
Since Marketing isn’t a binary and predictable series of causes and effects, there’s a lot of unattributed heavy lifting behind the scenes. Consider the nurturing, educating, informing, comparing, advertising and demonstrating across a variety of marcom channels.
The long and winding road from awareness to action has grown even longer and windier now that customers have taken the wheel in their journey and discovered countless resources at their fingertips.
The inability to show clear and repeatable binary Marketing inputs and outputs is a problem.
The Human Behavior Problem
As much as we’d like to think otherwise, human behavior isn’t predictable.
Some basic needs may produce patterns–things like buying gas, picking up groceries, getting an oil change or using electricity. But, as author JP Castlin points out, “The nature of business is full of factors out of our control and thus impossible to precisely predict, attribute, or evaluate.”
These factors include things like a global pandemic, a presidential election, unemployment, or surges and crashes on Wall Street. [Raise your hand if your business–or your own life–was impacted by any of those factors in 2020.]
The Forecasting Problem
As eventful as 2020 was, none of us saw it coming.
The nature of human behavior also creates a forecasting problem for marketers in which we can’t guarantee results. Castlin went on to say that while we can’t guarantee success, we can increase its probability.
Like investing and gambling, all forms of marketing involve some risk. So does election polling, weather forecasting, and fantasy football. Even the experts are very likely to get the future wrong.
But, here’s why that’s a good thing for marketers. The fact that we can’t go to the casino and put all of our roulette chips on 21-Black and then hit it every time means that we’re free to step away from the table and find something else to do–something where we can win. Something better.
Human behavior and its impact on effective forecasting is a problem.
The Attribution Problem
Not only can we not guarantee or predict results, we can’t even reliably replicate success based on what we’ve done in the past or what others in our industry have done.
When we try to attribute success to past events, we unknowingly develop what psychologist Edward L. Thorndike first identified in the 1920s as a “halo effect”–a cognitive bias that leads us to make specific inferences on the basis of general impressions to reduce cognitive dissonance.”
In other words, we generalize. We assume what worked before and elsewhere will work again. Why do you think most job interviews include questions like, “Tell me about a time when you developed a campaign and saw strong results.” Companies assume you can replicate the success you’ve had in the past.
But, you can’t. Not predictably at least. Attribution doesn’t mean replication.
Part of the issue goes back to human behavior. Have you ever had a customer attribute his or her buying decision to a single piece of content, one conversation with your team, or any individual factor?
Maybe B2C e-commerce companies can make that claim if they have strong online advertising programs and back-end analytics. Still, it’s more likely that it takes several ad impressions or flash sale emails to create a customer. There’s no single magic bullet.
Unfortunately, as every marketer knows, not all that is measurable is valuable and not all that has value can be measured–or in this case, attributed. In fact, according to a 2018 study, only 18% of total return is visible through attribution modeling.
We’d love to know exactly what’s working. If we did, we could double-down in those areas and cut back in the others. Unfortunately, in spite of all the technology around us, John Wanamaker’s famous quote still holds true in most cases (ideally to a lesser percentage): “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.”
The inability to directly attribute specific outcomes to specific outputs is a problem.
The Sales Arrogance and Marketing Myopia Problem
I’ve worked in Sales, managed Sales, and reported to Sales–so I can say this with the utmost honesty…many salespeople are arrogant.
In their/our defense, Salespeople have to be at least somewhat bold and overconfident in order to convince other people everyday to part with their own money. Along the way, they have to eat a lot of “No’s” and anger from people who hate being sold to. On top of that, most salespeople rely on making those sales in order to support themselves through commissions. And on top of that, sales departments are notoriously competitive, performance-driven, and unforgiving when reps don’t meet their quotas.
Historically, sales and marketing have swayed from being lumped together to being siloed in their own rooms until they can learn to play nicely together. When Marketing reports to Sales, we hear downtalk like, “These Marketing leads you’re giving me are garbage. I can’t work with these.” When the two departments are siloed, we hear, “I don’t know what content to create because I’m not getting input from Sales.”
Unfortunately, it’s the myopic view that marketing is only a means to sales that’s problematic. When marketers are told that their work is only valuable if it can show a direct line to revenue, it creates a self-fulfilling prophecy in which every tactic comes across as an ask. We get pop-up forms and info gathering that we convince ourselves is lead generation; visitors who we turn into subscribers with gated content; and email lists that balloon, unchecked, over time.
We busy ourselves with production, but we leave little to no room for brand development, content marketing, or customer research.
This also isn’t a new problem. In fact, Theodore Levitt published Marketing Myopia in the July-August 1960 issue of the Harvard Business Review. In it, he says:
“The difference between marketing and selling is more than semantic. Selling focuses on the needs of the seller, marketing on the needs of the buyer. Selling is preoccupied with the seller’s need to convert his product into cash; marketing with the idea of satisfying the needs of the customer by means of the product and the whole cluster of things associated with creating, delivering, and finally consuming it.”
Levitt went on to say,
“Most important, what it [the company] offers for sale is determined not by the seller but by the buyer. The seller takes his cues from the buyer in such a way that the product becomes a consequence of the marketing effort, not vice versa.”
Yet, today even when sales reps take prospects out to ball games and golf outings or wine and dine them after trade shows, we continue to hear things from them like this:
“All content should drive revenue or it’s a waste of time/money. Sorry. Not sorry.”
You may not be sorry, but I am.
Sales arrogance and Marketing myopia is a problem.
The Solution: Return on Improvement
For all the reasons I mentioned above, return on investment is a terrible way to view the value of marketing in an organization.
Return on investment is binary.
Return on investment assumes there’s a direct attribution between an output and an outcome.
Return on investment pretends we can repeat those outcomes in the future–that we can control human behavior–and thus, profit and loss.
Return on investment threatens to withhold resources unless we can forecast, if not guarantee, those outcomes.
But, Marketing is not binary.
Marketing, like investing, gambling, or sports talk radio, will miss the mark when asked to forecast results or predict human behavior.
Marketing doesn’t have an attribution model that’s so complex and complete it can assign credit to every touch that influences a buying decision.
And, in fact, Marketing becomes myopic and ineffective when it’s beholden to Revenue (and more specifically, held under the thumb of the Sales Department).
Therefore, the value of Marketing within a company (and whether or not marketers are “doing their job”) can’t be tied entirely to financial return on investment.
Next week, we’ll dig into this topic more and give actionable tips that start you down the path to better marketing.