Finding the return on investment for marketing activities is like the holy grail for CMOs. There are countless articles wit ideas on how to determine social media ROI, content marketing ROI, video marketing ROU, and so on. We all have heard ‘I know 50% of my marketing spend is wasted, but I don’t know which 50%‘.
Every marketer has a hypothesis of what works. Otherwise, how could you do your job, You have one, right?
We should keep in mind, marketing leaders are not always looking for a mathematical formula, we are often looking for something more basic, more essential. We need to answer the questions: is this working? Should we do more? Could we have the same results with less effort? How do we know?
This is not a post about how to determine ROI (for my POV on social media ROI you can check my slideshare from 2009). This post is about how to make sure you have found a formula that works. Success without repetition is luck. Good marketers know what works, and can have predictable success.
There are many challenges that make it very hard to understand what marketing activities work. Here are three:
- The Delusion of a Single Explanation: We would like things to be simple. Marketers would try to find correlation between two factors: satisfaction score and revenue growth, attending a webinar and purchasing, etc. In reality, most outcomes depend on a multitude of factors.
- Confusing Correlation and Causation. Maybe we have observed people who visit a webinar buy more from us. But do they buy more because of listening to the webinar, or did they decide to listen to the webinar because they wanted to buy more anyway? Phil Rosenzweig, author of The Halo Effect (great book, by the way), observed the consulting company Bain & Co claims on their website “Bain clients have outperformed the stock market 4 to 1″ implying working with Bain leads to better performance, but it is very possible that high performing companies are the only ones that can afford Bain.
- Customers buy on emotion. Emotions are hard to understand and to map to a formula (anyone who is married knows that), how people buy cannot be put in a spreadsheet. But marketer will try anyway. It is almost impossible to understand what are the customers intentions. A UT professor shared with our class ‘I saw someone at Costco in the checkout line with a dolly on which he had two milk jugs and a 50″ plasma TV. Did he go to Costco for the milk and when at the store decided to buy the TV or the other way around?’
How do we solve this problem of correlation versus causality? How do we know what we think is working actually works? How do we avoid falling in the traps of market research?
I found one interesting point of view from another industry: the Bradford Hill criteria is used to determine cause and effect in medical tests. If this is the method to determine causation in an industry where being wrong can be the difference between life and death for many people, I figured it is probably good for us to learn from. These are the Bradford Hill checks to make sure your assumptions of cause and effect are correct:
Four more things to keep in mind
- Don’t rule out something just because it did not work before. I have heard many times ‘We tried that last year and it does not work’ . Goes back to specificity. This is a false negative. Until you understand why it did not work, you may keep testing. Maybe you can find a way to make things work
- Measuring direct influence behavior is easier than building a model that measures leading indicators to understand customer behavior over time that is difficult to observe and measure.
- Marketing optimization, especially online, can easily trick you into optimizing your marketing for those buyers that will buy quickly, not for the buyers that will take longer to buy which could produce a higher customer lifetime value
- As Albert Einstein said: Everything that can be counted does not necessarily count and everything that counts cannot necessarily be counted.