The Marketing ROI Disconnect

The biggest cause of the short tenure of Chief Marketing Officers (CMOs) is their failure to measure the return on investment (ROI) of marketing expenditures.  If we have heard that once, we’ve heard it a thousand times.  And like most mantras that get repeated over and over, you begin to believe it without really thinking about it.

I think the biggest cause of CMO failure is not getting senior management buy-in about what marketing can and cannot do.  Many companies try to measure the return on the marketing investment in terms of sales and profitability.  In some businesses, such as consumer goods and direct marketing, measuring sales for ROI might be a fair barometer.   In other cases, such as many B2B companies, there is so much that happens between the marketing activity and the sale that this might be totally unrealistic.   Not to mention the long sales process that can make it hard to determine who should be credited with the sale.

In many companies it might be smarter to set the ROI for marketing expenditures in terms of areas that marketing can impact, such as:

  • Number of inquiries
  • Number of leads
  • Requests for quotes or proposals
  • Changed perceptions of the company

Holding the CMO accountable for sales reminds me of a story at a large company where I worked.  The company had committed to a large advertising program to change perceptions among key buyers of its services and the brokers who represented the buyers.  The media budget was significantly higher than previous budgets.  After a few months, one of the division presidents complained that the advertising program wasn’t increasing sales, to which the CEO replied, “If the advertising were increasing sales, what would I need you for?”  End of complaints.

The CEO had realistic expectations for the advertising: That it could change buyers and brokers’ perceptions of the company and that those changed perceptions would make them more likely to request a quote from the company.  We measured perceptions on key variables before the campaign started and at six-month intervals.  Sure enough, the needle moved on the variables that were important to buyers where our company was particularly strong.  Whether the sale was made depended on many factors including understanding what the buyers’ needs, terms of the deal, price, competition, etc.  Marketing had no sway over most of these areas, so to hold the CMO responsible for sales was unreasonable.

So before a prospective CMO accepts the brass ring, he or she must be clear about expectations.  If they are expected to increase sales, they better be certain they have authority to make changes through the entire sales chain.  Otherwise, they will be held responsible for something over which they have little or no control.  That is a recipe for a short tenure and bitter feelings on all sides when the CMO leaves on his/her own or is forced out.

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