Growth Insights for CEOs

A CEO’s Guide to Marketing ROI

Posted by Bill Andrews


The old John Wanamaker quote from 100 years ago still rings true today for many CEOs: “Half the money I spend on advertising is wasted; the trouble is, I don’t which half.”  While we have made amazing advancements in marketing, in some circles, accountability is not among them.

Are you happy with the financial documentation being provided to you on marketing effort ROI? If the answer is “no,” you share a common pain point that many CEOs we work with share with us when we first sit down with them. The good news? This is a pain point that can be addressed in a relatively quick manner -- in many instances, within 90 days.  

If you haven’t been given one before, a “marketing-return-on investment-roadmap” is a great way to visually gauge what you’d like to see changed within your marketing structure.

Let’s take a quick tour through four quick steps that can help you to bring your marketing department’s reporting full circle.  An added benefit is at the conclusion of the project, your company will also have new insights into project prioritization that may not have existed before.

Step 1: Create a Shared Language

Let’s begin by grading ourselves on our ability, across divisions of the company, to describe the basics of profitable growth. This includes variable product and service cost items, the definition of sales versus the definition of marketing, our top geographic trade areas and customer segments that produce most of our sales and profitability, and so on.

To get a feel for the shared language depth at your company, pick a few “softball questions” from the topics listed above, tweak the wording to your industry, then introduce them at your next direct report meeting.  Ask everyone to answer each question, via email back to you, before they leave the room.

This feedback should be completed without collaboration with others in the room or without assistance from an outside lifeline. By the time you return to your office, you will have taken the pulse of what your key leaders believe to be the engine that drives your enterprise’s profitable growth. You may in fact notice that there is little common ground in their descriptions. If the marketing lead is speaking one dialect, while sales is fluent in another, and finance in yet another, we know that we must create a common language for future growth. Lest you think you can skip this step, I hope you can see that this is a 15-minute exercise that can deliver a wealth of insight.

One tip for achieving that common language: Task your marketing lead or another member of your leadership team to take charge of an ad hoc committee comprised of the heads of your major units, including IT, sales, HR and finance. The goal of the committee is simple – to document and agree to a shared language that all departments and personnel use when it comes to tracking profitable growth.

Step 2: Remember -- “In God We Trust; All Others Must Bring Data”

Many of us were taught Edwards Deming’s classic phrase, “In God we trust, all others must bring data,” well before Big Data was front and center in our daily business lives. In Step 2, your ad hoc committee has a new task: We want them to define companywide standards, then set forth a measure for tracking and reporting our progress toward the creation of profitable growth. Categories that deserve their attention include:

  • Definition of internal ROI expectations;
  • Revenue sources at the customer level;
  • Defining fixed and variable sources and costs;
  • Defining marketing and sales related sources and costs;
  • Agreeing on top prospect segments;
  • Agreeing on top geographic prospect areas;
  • Agreeing on our top three companywide business objectives for the next 18 months;
  • Naming the customers who contribute 80 percent of our profitability.

Step 3: Connect the Dots Between Marketing & ROI

With the shared language, gauges and definitions we developed in Steps 1 and 2, we can now implement a consistent tracking program that documents marketing and sales tactics, and the ROI they produce. Have the ad hoc committee start by building a baseline from projects that were implemented over the last two years and that have consumed most of your marketing spend. Record the following:

  • Program description (state the overall business objective and lessons learned)
  • Marketing vehicles used (digital, PR, direct sales incentive programs, direct mail, telemarketing, print ads, SEO, etc.)
  • Geographies targeted
  • Segment(s) targeted (Claritas, Prizm Clusters, SIC codes, etc.)
  • Initial forecast (if any) (should be mandatory going forward)
  • Actual sales
  • ROI

Step 4: Define and focus on the “Main Thing”

My guess is that your company is looking at hundreds of potential projects that are competing for a limited amount of time, resources and budget. Have your committee become the central body to help prioritize all opportunities in front of the company. Using a common scorecard, show the projects in front of the company today on a graph with profit potential and time as the two axes.

The size of each individual project bubble point on the graph can represent how it grades out in meeting predetermined strategic goals. This step gives proper visibility to items that may be necessary, but do not fit a predetermined ROI model – in some industries, this would be things like regulatory-dictated projects.

With a company-wide, common-language process in place, you can undertake this step with confidence – placing precious resources where they bring the quickest and most remunerative growth. A major additional benefit is that the entire company now can fully understand why the focus is on selected projects, and where their individual contributions rank in the prioritization. It also fosters cross-functional teamwork, as everyone can see the strategic priority being placed on profit-producing growth.

The Bottom Line

When executed properly, your marketing spend can be the engine that drives the highest return on investment at your company. After completing the above exercise, your team will have the tools to put a process in place that will prioritize all the treasure and talent required to identify, prioritize and execute the ideas that have emanated from all areas of your company, whether conceived by IT, sales, finance, regulatory, or those behind your delivery system.

I believe that marketing can and should be a company’s highest ROI producing area. Unfortunately, “random acts of marketing” often are drains on precious resources. The four steps we have just covered help align the troops and can produce accountability where none has existed before. This strategic mindset is core to all we do at Chief Outsiders as we work with our clients; it’s how we implement profitable Growth Gears!

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Topics: Marketing Plan, ROI

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