Jonathan Knowles has a background in Finance, Business Strategy, Brand Strategy and Brand Valuation. His articles have appeared in Harvard Business Review, MIT Sloan Management Review, The Wall Street Journal, Marketing Management, Professional Investor and Intellectual Asset Management.

ROI – a rose by any other name?

by Jonathan Knowles on August 15, 2009

My admonition to marketers to be specific in their use of the “ROI” term makes me feel like King Canute, commanding the incoming tide to retreat.  If anything, the use of “ROI” as a general catch-phrase for “marketing accountability” is becoming more embedded.

I am conflicted about this – part of me delights in seeing marketers embrace the need for demonstrating accountability for their use of company resources (my new client last week even beat me to the punch in suggesting that we should articulate the commercial benefits we expected to result from our messaging assignment – amazing!); but part of me despairs that the ROI moniker will encourage financial types to see marketing as an essentially tactical discipline whose impact can be fully captured within the 12 to 18 month horizon typical for ROI measurement.

As any of you reading my posts on a regular basis will know, I have three main issues with the financial measurement of marketing and/or brands whether in the form of ROI or brand valuation:

  1. First, it involves treating marketing/branding as an activity that is separate from the other operations of the business (which seems crazy for a discipline that claims to focus on the overall customer experience, rather than just its communications)
  2. Second, it is hard to do.  It is genuinely difficult to construct a model that demonstrates the delta between “company with no marketing” and “company with marketing” – most people end up with a model that merely demonstrates the impact of marketing communication (in which case, my first point applies)
  3. Thirdly, a financial model is rarely what the senior leadership of the company wants to see.  In my experience they are much more interested in an answer to the question “how is this investment in marketing going to impact the overall performance of the business?”

I have mentally committed to “having the serenity to recognize the things that cannot be changed” and to use each reference to “ROI” as the opportunity to discuss the nature of accountability rather than the trigger for launching into a lecture about the correct use of financial terminology.

Tagged as: Marketing Finance, Marketing Performance, Measure Value

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