Written by Andrew Davies, Strategy & Planning Director at krow

Reinventing ROI

Return on investment (ROI) is nothing new. It’s been synonymous with marketing since the 60s. It’s an important factor in our day-to-day lives as marketers… as it should be. But it’s hard to deny the way that it’s changed modern marketing. And modern marketing has changed the way we interpret ROI.

An obsession with ROI can create an attitude that is too single-minded. Too focused on the short term and doesn’t factor in human behaviour.

Efficiency in spend and delivery has pushed marketers to hyper-target the ‘low hanging fruit’. There is a growing reliance on attribution modelling to spend on the channel that can be proven (in the loose sense) had a factor in purchase. Efficiency means we measure the impact of our campaigns in weeks and months, rather than seeing the full picture.

But how’s this plague of ‘short termism’ all come about? Well, we have a few thoughts…

The structure of workplaces

The world moves fast. And people aren’t incentivised to make money for their company in 5 years’ time. We need to prove it at quarterly, or even monthly, reviews. Shareholders demand to see constant growth, and short-term metrics are more seductive to them.

One way is to take the lead from start-ups that offer share options to employees. If (or when) they go public, this can create a wave of millionaires overnight to share in successful growth.

‘Wastage’ has become the enemy

‘Wastage’ in advertising was not only necessary but vital for long-term growth and penetration amongst new audiences. The tools we have at our disposal to segment audiences mean we focus on people that are ‘in-market’. But is the danger that they are already buyers?

A key to brand metrics is driving penetration. And this means marketing to a broader target that includes light and non-users. Childless adults that could become Pampers buyers, or young drivers that can’t yet afford an Audi saloon.

Brand building is being underestimated

We need brands to help decide. To ensure quality. To broadcast who we are to people. Before somebody will buy a product, they buy into your brand and what it represents.

As the great Stephen King said, ‘a product can be outdated, a successful brand is timeless.’ Brands that connect emotionally generate more customer value. It’s not as easy to measure, but we know it works.

The platforms don’t make it easy

Facebook has made it nearly impossible to reach an audience organically. Algorithms are designed for those that spend. You have to spend for your reach, and thus we need to prove that when we spend, we reach an audience. It’s a vicious cycle.

And finally… some practical advice

Brand building and short-term activations don’t have to be at odds with one another. All brands need sales activation – they create short-term sales uplifts and use behavioural prompts to encourage consumers to buy. But it is strongly boosted by brand building (Binet & Field, The Long and the Short of it). They’re both important. So, do both. But when you do, consider this…

  1. Be careful with short-term metrics as they do not predict long-term success.
  2. Consider human behaviour when looking at your analytics dashboard.
  3. Look at the whole funnel when it comes to metrics. For channels that are difficult to measure, look at correlation that results in a takeover in sales.
  4. But most importantly, in a world fuelled by ROI, don’t let metrics and the demand for speed kill creativity. Consumers don’t have the tolerance for boring stories.

If you’re looking to avoid the pitfalls of short-termism, our ‘brandgrowth’™ practice is a practical and proven methodology to add long term value and potency to any brand. Get In Touch if you think we can help.

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