Wednesday, August 04, 2010

Lack of ROI Measures Threatens Marketing Budgets

According to an article by eMarketer, “Is the Click Still King?”, marketers are still having a hard time connecting their investments to tangible bottom-line impact. Today's executive management strategy is driven by Frugalnomics, where maximizing value reigns supreme, and all spending needs to be tied to tangible gains. The lack of quantifiable ROI means that Marketers will struggle for their fair share of the budget.

We have tracked this same impact in IT budgets for years at Alinean. Post the technology bubble, Frugalnomics became the modus operandi for IT decision makers. As a result of this shift, and the inability for IT executives to tie IT spending to tangible bottom-line impact, IT spending as percentage of revenue declined significantly. This despite that during the same time IT became even more important to the organization. According to our ValueBase(tm) metrics comparing IT spending vs. financial performance, IT spending declined from a peak of 3.8% to less than 3% or revenue (analyzing average from 2003-2009), a 30% decline in IT spending compared to revenue.

Does a similar fate hold for marketing budgets, which today are 6% of revenue on average. We believe so, unless marketers realize that frugalnomics demands quantifiable proof of value.

According to eMarketer however, this is not the case today. “Online marketing has been touted for its measurability, a quality that should make it easy for marketers to determine effectiveness and value for money. Despite widespread recognition that the click-through does not measure the full effect of an online ad—even ones placed with direct response objectives—and calls for better branding metrics, many marketers still rely on the easy-to-track click as their top performance metric."

A March 2010 survey by Chief Marketer showed the click remained on top, with 60% of US marketers reporting they measured performance in click-throughs. Less than two-fifths measured overall return on investment (ROI). Similarly, Collective Media reported that in February 2010, click-throughs were the most common measurement of ad network performance, used by 64% of responding advertisers.

The CMO Council’s ‘State of Marketing’ survey did not ask about click-throughs specifically, but found marketers worldwide were most likely to measure their campaigns through page views, registrations, and the volume and origin of site traffic.

The original article can be found at:
http://www.emarketer.com/Article.aspx?R=1007679
Source: “Is the Click Still King?” eMarketer

No comments: