Quaid E Azam

Topics: Marketing, Advertising, Rate of return Pages: 19 (4734 words) Published: March 21, 2013
An approach to mastering the marketing
Michael D’Esopo and Eric Almquist

Michael D’Esopo is a Senior
Partner with Lippincott
Mercer, Boston,
Massachusetts, USA. He
can be reached at
Eric Almquist is a Senior
Partner with Lippincott
Mercer, Boston,
Massachusetts, USA. He
can be contacted at

ith eyes fixed firmly on growth, CEOs are now acutely aware that their marketing investments are perhaps the last significant elements appearing on financial statements that lack clear links to revenues and profits. CFOs are in lockstep with CEOs, calling for results from the last few quarters’ investments and limiting future spending if they don’t like what they see. In fact, it is common for most C-suite executives to view marketing as a sinkhole full of investments with undocumented returns.


Marketers are in no position to argue. They do not deny that competitive pressures are more intense and profit margins remain vulnerable. Yet they are compelled to support faster and more frequent new product introductions – another outcome of fierce global competition. They have to do so with hands tied behind their backs, because they lack the ROI data to make a compelling case for suitable budgets. And today, the corporate marketing department no longer has the influence it once enjoyed.

Financial pressures, a shift in channel power, and marketing’s inability to document its contribution to business results have combined to force reductions in marketing spending and influence, and to accelerate a transfer of funds and responsibilities to the field sales organization, notes Dartmouth’s Tuck School of Business Professor Frederick Webster Jr, in a recent article in MIT Sloan Management Review. Webster and his co-authors point out the dangers in the disintegration of the marketing function – a short-term focus that hurts product innovation, weakens brands, and impairs companies’ abilities to identify and reach future customers and markets.

Marketers face an uphill struggle. More than one-third of CEOs say their marketing organizations need improvement. Some chief marketing officers (CMOs) and their lieutenants are making heroic efforts to communicate in fiscal terms, as demonstrated in the regular ROI sessions at the annual CMO Summit, hosted by McKinsey & Co., the Marketing Science Institute, and the Wharton School of the University of Pennsylvania.

This article presents an
analytical ROI framework that
helps managers make sense of
complex and seemingly chaotic
marketing investment patterns
and allows them to quickly
reach conclusions about future
marketing commitments. With
new ROI techniques in hand,
executives and, specifically,
marketing leaders have begun
to take a portfolio approach to
their investments. This
approach allows marketers to
invest more effectively – and
makes them more accountable.

The extent of the struggle can be seen in recent surveys. According to the 2005 Marketing ROI and Measurement Benchmark Study from consultancy Lenskold Group and MarketingProfs.com, only one in five marketers uses marketing ROI, net present value, or another profitability measure for at least some of their marketing work. More than half admit that their ability to measure financial returns is ‘‘a long way from where it could be.’’ It is not surprising that the average tenure of CMOs for North America’s top 100 branded companies is less than 24 months.

If any industry sector has made headway in establishing marketing ROI, it is the consumer packaged goods (CPG) business. CPG companies have spearheaded the use of growing volumes of data from the point-of-sale (POS) and applied techniques such as historical time series analysis to identify patterns in purchasing trends. They have looked across company functions to see where marketing money is being spent, building up in-house skills in

q Lippincott, a division of
Oliver Wyman, Inc.

PAGE 122

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