Marketing and ROI/ROO Article from Sports Business Journal

The ability to navigate large organizations is often the single most important key to success in a professional manager’s performance. Why is this general management skill even more difficult within the area of marketing? There are two key barriers of which the informed champion of marketing investments must be aware.

The first barrier is a general lack of understanding about how marketing works. There’s a old adage from John Wanamaker: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” 

Many organizations consider marketing to be a necessary evil. Those outside of the marketing department are not sure what they actually get from a marketing investment, even though they understand it is a vital function in every successful company. Why is this? In general, I believe it is due to a misunderstanding about the return on investment in marketing spending when compared with a company’s other investments.  ROI and ROO can, and must be, calculated for marketing investments. Without them, navigating the large and diverse organization is all the more challenging. 

Secondly, many large organizations have ceded much control over regional and business-level marketing spending to lower level managers. There are many reasons for this. Managers often quip, “You don’t understand my territory/product/service. I need to spend marketing dollars this way.” While these differences are very real, this behavior creates massive inefficiencies in spending, as well as possible resentments and misunderstandings. 

This loss of control to territory/product/service levels of management creates three problems: significant communication issues both within and without the company, inefficiencies in spending and dilutive brand messaging — all of which potentially create a cancerous division among the various company units. 

So how does a manager overcome these obstacles?

1. An investment must start with a goal in mind. This may sound incredulous, but I have seen many investments in marketing at very large organizations that happen because no one has ever asked why they are spending what they are spending. The budget process in very large organizations (at least those that are not under massive and life-threatening pressures) can be an alarmingly simple process. You take last year’s budget and see what needs to be modified. Thus, if we spent “X” dollars on print media last year, we could reasonably expect to spend “X” dollars again. Internal budget negotiations rarely address the question of the efficacy of the spending. There is little way to judge success when the investment was not specifically designed to return a defined set of results. 

Managers may muse that since market share went up, the print campaign must have worked. The print campaign might never have been designed to go after market share — it might have been to build the brand and create sales. To our earlier discussion on ROI and ROO, a company must align and design marketing processes to deliver on measurable and defined and agreed upon results. 

2. Along with designing marketing investments for measurement using tools such as ROI and ROO, there must be a clear delineation and understanding of efficiencies. While the argument for simple return can be clear, it must also be clear how this will save money in the overall business. By focusing on the core brand positioning, the message can enjoy greater reach and frequency. 

One great example of this strategy would be GE’s investment in the Olympics. It made a conscious decision to enter into only one major sponsorship relationship, and that one sponsorship delivers against no less than 13 of its major divisions. By combining all efforts on one significant, global-reaching sponsorship, it has maintained unity of message while aligning the iconic GE brand with the iconic Olympic rings. 

In the same manner, by concentrating a company’s sponsorship marketing resources on one sport — or one league or team — a company can deepen the message by exiting relationships that do not directly support the stated goals. This approach makes saying “no” to the hundreds of requests for sponsorships easier and less damaging, even when the requests are made by consumers and clients. Saying “no” correctly is very important in order to maintain customer and client good will. The rejection is no longer perceived as unsympathetic — it’s just that the company is focused on this one sport or art or entertainment segment. Meanwhile, an overall cost savings can be built into the new strategy.

3. An investment must be positioned as a unifying force. You cannot retain regional/product/service disparities and expect any sort of unifying results. Good managers seek harmony in the total organization. Marketing investments done in the correct manner can help accomplish that result. These highly visible market statements powerfully communicate to the public, investors, and employees what the company stands for. DuPont achieved this unity by focusing nearly all of its sponsorship spend on NASCAR and one driver in particular, Jeff Gordon. While this arrangement was initially considered as a business expansion and unifying strategy for the paint division (a terrific alignment with Rick Hendrick who was a major customer of that division and the owner of Hendrick Motorsports, for whom Jeff drove) it quickly became the “team spirit” of the entire company, loved and backed by all division employees as the highly visible and successful investment that it was.

Newly acquired companies or divisions have different cultures. A marketing investment positioned correctly can provide the unifying, flag-raising theme to rally the troops.

This effort is normally led by the CEO/COO. But that’s not who you are, I am guessing. So you need a champion. This is a senior manager with influence at the top levels of the organization who can help position the new strategy as better defined, more measurable, creating greater cost savings through efficiencies of scale, all the while providing a unifying force within the company. While this may sound blindingly obvious, it is often more difficult in practice because we fail to provide the champion with the ammunition to make them want to put their social and political capital into the project. 

By following the three critical steps above, you will give your champion the fuel to drive the project home.

Raymond Bednar (raymondbednar@hyperion-marketing.com) specializes in advising and implementing optimization strategies for investments in marketing channels at Hyperion Marketing Returns Rockefeller Consulting in New York City.