Marketing ROI Works Just Fine

Eric Wittlake takes a rather gratuitous swipe at the burgeoning metric, Marketing ROI. He begins his argument with the rather provocative title, "Marketing ROI is a broken metric," and sets up about providing support for the title with the money complaint:

However, your marketing performance measurement doesn’t capture my disdain. ...How many more people like me are out there? More than you realize.

  • How many other people are tired of your spammy keyword autoresponder on Twitter?
  • How many people are tired of your creepy retargeting ads?
  • How many people are tired of the fine print on your offers that get them in the door only to find it doesn’t apply to them?

Quite simply: you don’t know. Marketing ROI measurements are woefully incomplete. (emphasis in original)

Wittlake's supporting statement appears quite correct. Marketing ROI fails to capture customer sentiment. However, this support appears a mismatch for the headline.

Marketing ROI remains a terrific, solid metric, which any marketing manager should include in his or her dashboard. Its inability to capture customer sentiment does not mean it is a broken metric though.

Similar to the broader ROI formula that everyone was exposed to in a corporate finance course, Marketing ROI is a ratio that encapsulates the investment in marketing activities to the return, or profit, generated from those marketing activities. A marketing activity includes sales promotion, advertising campaigns (including traditional, social, and mobile medium), sales representatives' salaries, and commission or bonuses, as well as freight among other items. By calculating, or measuring the return, or profit, from those marketing activities, a marketing ROI percent can be calculated.

Notice the list of marketing activities failed to include customer sentiment.

Asking marketing ROI to incorporate or reflect customer sentiment would be like asking your instructor to complete a full triathlon. Neither the metric or the faculty member is up to the task.

The good marketing manager understands the limitations of every metric including marketing ROI, and incorporates a variety of measures in his or her dashboard. In turn, a good dashboard helps the marketing manager overcome the limitation of each measure to avoid blind spots that would prevent the firm from achieving a competitive position in the marketing, and, ultimately, superior financial performance.

Customer sentiment appears in a different spreadsheet