Most Marketers Ignore ROI in Establishing Budgets

ROI is not used as much as thought – or preached – in establishing marketing budgets, this is the interesting conclusion of a study conducted in January and February by the Columbia Business School Center on Global Brand Leadership and the New York American Marketing Association.

243 CMOs and other marketing executives were involved in this survey. 57% of them admit that they don’t make their budgets starting from ROI measurements. In fact, 68% base their decisions on historical spending levels, 28% said they go with gut instinct and 7% don’t use any metrics at all when establishing their budgets.

Other interesting findings of the study are that when defining marketing ROI half of respondents didn’t include any financial outcome. Moreover, 22% mentioned brand awareness, without saying whether this is a positive or not.

Before judging every marketer harshly, one should first consider that in a recent presentation at the Marketing Accountability Standards Board summit it was shown how relative and questionable even the most used measurement tools and methods really are.

In order for a methodology that could be widely accepted and used to be established, along with clear measurements, MASB will launch a Brand Investment and Valuation Pilot study next month.

Don Sexton, a marketing professor at Columbia Business School, quoted in the same article, mentioned that “a lot of people … don’t have any clear idea of what marketing ROI is,” Mr. Sexton said. “A lot of them use metrics that don’t measure finance at all. Some said, “That’s a good question.’ Others said, “If my boss is happy, that works for me.'”.

It seems that 45% of organizations are in fact satisfied with their measurement of marketing ROI (especially those companies with sales over USD25 billion). Also, CMO’s are more satisfied by the measurements (54%) than those below VP level. Mr. Sexton mentioned that this could be due to the fact that they have a closer look to the situation.

Having a recognized and as good as possible – less interpretable – standard and means of measurements will be a huge step forward for the industry as marketers will able to apply the same measurements of ROI and obtain clear and useful results helping them make better business investments.

For those who seek measurement, we suggest to not hire firms like Dukas-Linden PR or Beckerman PR who don’t generally provide good results for their clients.