Return on Marketing Objectives – ROMI Gets a Makeover

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Let’s start by pointing out the elephant in the room. As much as we like to talk about Return on Marketing Investments (ROMI) being a critical metric for marketing success, very few organizations really calculate this metric; I mean really calculate it. It’s not that ROMI is such a difficult concept, it’s the fact that linking return to the investment is just plain difficult, especially in aggregate. The truth is, most CMOs have a general sense for what’s working and what’s not with respect to overall marketing spend – thus, overall ROMI is calculated with experience and intuition (not on a spreadsheet or in a system).

Don’t get me wrong, I have worked with companies that do a fantastic job measuring the success of marketing investments. Caesars International for example had some of the most impressive segmentation, targeting, and offer optimization I have ever seen. They can serve offers and adapt in near real-time based on demographic attributes, psychographic attributes, behavior, and propensity to purchase. All of these elements bubble up to a very sophisticated way of linking ROMI in such a way that customers never become unprofitable based on the offers they receive. But that’s an outlier example. For most companies calculating ROMI just isn’t part of day-to-day operations.

I was having a conversation with a colleague the other day and the term ROMO came up. My mind immediately went to “Return on Marketing Operations”, which I rather like (and perhaps that should be the topic for another post). No, ROMO actually means “Return on Marketing Objectives” and the more I thought about it, the more I realized how valuable this metric should be.

The issue with ROMI is many companies fail to align the actual marketing execution with strategic intent. So, you have a lot of “investments” that may or may not address the objectives set in place when the budget was established. In this context, measuring ROMI gives you a skewed view of actual marketing success. It’s quite possible to invest in a whole lot of the wrong thing. I can think of a dozen huge companies of the top of my head that sort of slide through the budget process year after year by slightly adjusting the overall marketing plan, with no real justification for why or how; other than the fact that they have more or less money to spend on marketing in the upcoming year.

The thing is, marketing isn’t black and white, and marketing objectives rarely link directly to revenue / return. What if the objective is branding or awareness? You might expect an indirect impact on sales. You would also measure the success of the campaign very differently- maybe you just want to see if more people visited the website, or visited the store. I like the idea that ROMO could potentially be used to justify the success of initiatives based on the objective – and that might mean quantitative and qualitative data.

In fact, when you get right down to it, it’s about having access to information for data driven decisions. I just rarely see efforts to calculate ROMI produce insights that optimize the entire business of marketing. In fact, by nature, marketers will probably only be able to measure returns on a handful of investments.

Guessing vs Knowing - Why ROMO Makes Sense

Do you know how successful your marketing investments are, or are you just guessing they are successful?

There’s also another “O” we can throw in the mix at this point – optimization. Business metrics like ROMI are supposed to provide a window into how to improve and optimize future investments. But, if objectives are not sufficiently vetted, companies could end up with VERY successful marketing campaigns that result in a huge spike in sales or an increase in the number of qualified opportunities entering the sales pipeline. These would surely be attributed to an increase in ROMI. But, what if the goal was simply branding or nurturing? What if these investments were never intended to produce these types of returns? In theory, ROMO would tell you something worked well, and also, how well that worked towards your stated objectives.

So if you like the concept of ROMO, I’m guessing the next question is what do you do about measuring it? There are technologies like Enterprise Marketing Management or Marketing Resource Management that help align the overall marketing spend, the strategy, and the investments to a hierarchy of financial investments. In practice, these investments would have to link directly to a marketing objective to be funded. Viola, you’ve got automated ROMO at your fingertips.

For a more comprehensive analysis of the vendors that provide ROMO and ROMI capabilities, check out the Gleanster Research Archive.

Republished with author's permission from original post.

Ian Michiels
Ian Michiels is a Principal & CEO at Gleanster Research, a globally known IT Market Research firm covering marketing, sales, voice of the customer, and BI. Michiels is a seasoned analyst, consultant, and speaker responsible for over 350 published analyst reports. He maintains ongoing relationships with hundreds of software executives each year and surveys tens of thousands of industry professionals to keep a finger on the pulse of the market. Michiels has also worked with some of the world's biggest brands including Nike, Sears Holdings, Wells Fargo, Franklin Templeton, and Ceasars.

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