Although many organizations are now incorporating informed decisions in regard to marketing budgets, very few were able to measure their ROI on their marketing spends and treat this process as a priority. Throughout 2020, research carried out by Gartner discovered that just 54% of organizations based major marketing decisions on the results of data analytics. It is rare for a business to consistently and successfully measure the ROI of marketing initiatives, and even rarer to efficiently use these measurements to guide optimal marketing spending.
In response to the recent Covid-19 pandemic’s financial shock to all industries across the globe, a large number of businesses introduced dramatic cuts to their marketing spending. However, this did very little to offset the economic uncertainty of the pandemic. Customer behavior shifted by a vast majority into the digital world, driving sales in e-commerce to unprecedented levels. This unexpected change put a significant strain on current market forecasting techniques and additionally emphasized the growing need for solid digital marketing strategies.
In this new environment, businesses were faced with the additional difficulty of quantifying the success of their marketing efforts, as well as measuring the impact that the down-shift in marketing spending had on consumers and profit. Data shows that fewer than 50% of marketers currently have a sophisticated system to measure marketing spend.
Development of up-to-date processes for data assimilation is made difficult by obstacles regarding siloed digital ecosystems, integrity of data, and reduced buy-in towards digital maturity by organizations. This is compounded further by strict browser and mobile policies and privacy regulations, which limit the ability of organizations to accurately capture consumer behaviour and preferences online. Customer habits have also evolved to prioritize privacy and, to some extent, prevent or limit data collection. Due to these challenges, marketers who continue to base decision-making just on historical trends will be unable to make effective decisions regarding marketing spending.
To navigate these obstacles, organizations must embrace transformation towards superior digital maturity, and processes must be adaptable, agile, and based on real-time data analytics.
These previously unforeseen challenges should now become a core priority of business strategy to avoid roadblocks in the future. Despite the pandemic fading into the background, these challenges have permanently altered the global marketplace to favor businesses with quick, decisive, and comprehensive choices, surrounding the allocation of the budget through solutions found in new developments in emerging technologies such as AI, giving marketing teams access to more powerful analytics.
While technology and the use of AI may be a necessary pillar for data-driven marketing spending, this is not the only factor to determine effectiveness. For marketing budgets to be planned and executed efficiently, it is necessary for the organization to transform at all levels. In fact, the combination of these data-driven processes with human capabilities results in a 10-25% increase in the effectiveness of marketing.
Being preemptive in business transformation is critical too, resulting in a sustainable competitive advantage for the organization as a whole. However, transformation to achieve an effective, agile ROMI program isn’t as simple as it seems–requires a combination of powerful tech solutions, cutting-edge analytics, a personalized user journey and communication matrix, and 360-degree customer-centric marketing campaigns. However, following this program through to its full potential to become an industry leader in marketing requires a complete buy-in at all layers of leadership and workforce empowerment.
The first step to successful transformation in this capacity is making sure that all members of the workforce are in agreement regarding goals, outcomes, and extent of change. This may sound simple, but is frequently overlooked, especially under time pressure to quickly implement major marketing decisions. Without clear communication, these initiatives can quickly dissolve, causing conflict and confusion within the workforce. Part of this process should also involve the clear establishment of taxonomy regarding marketing terms, across all levels of the organization—from marketing teams to the financial and sales teams. The need for a standardized marketing taxonomy is amplified by the need for measurement strategies to be standardized across all units of the organization. This standardization also allows a clear context for analysis of marketing spending, in particular, the impact of factors such as competitors, consumer fluctuations, and product changes.
Alignment of different teams can be reinforced by the definition of KPIs that focus on ROI, as well as uplifts in sales and optimization metrics. The clearer the goals and objectives are at this stage in the process, the more meaningful information will be able to guide decision-making in the future. For example, the creation of a highly comprehensive balance sheet for marketing spending will provide clear guidance and justification for the investments that provide significant returns in the long term.
These decisions can be based on key influential factors such as competitor behavior, channel dynamics, and trends in past performance. Strong alignment from employees at this early stage allows improved individual engagement and team culture from the beginning, increasing buy-in and employee initiatives in the future.
Once the taxonomy is established and a common strategy is clearly in place, the involved teams can then confidently move forward into planning and executing decisions regarding the allocation of marketing budgets.
Advanced analytical capabilities are essential for cutting-edge evolution of the marketing ROMI process. A marketing-spending model must be created that is highly automated and consistent while remaining highly transparent and holistic.
Advanced analytical models eliminate manual collection of data, which historically prevented the consistent collection of granular, up-to-date data of high quality. Manual data collection is often tedious and becomes more cumbersome when marketers require real-time data relating to the performance of campaigns, sales patterns, consumers, trends, and weekly spending.
These issues can be mitigated by collaboration with third parties to design and implement long-term analytic models that will automatically collect and track data points across all dimensions of marketing. Data compilation regarding sales, spending, revenue, and volume becomes systematic while additionally becoming more holistic and less labor-intensive. Automated processes can be established for the collection of future data, which is then organized in harmony with current taxonomies. Automation can remain at the forefront when the focus moves to data modeling, continuing to limit manual labor by utilizing strategies including probabilistic programming to measure impact.
For a marketing-spending model to be trustworthy, it must be highly transparent - both to all members of the marketing and leadership teams, and to other employees, allowing increased buy-in across the board. If employees are able to easily see the effect on allocation recommendations of a specific metric in the model, they will logically be able to make the case to change inputs. A model that invites user input allows this easy innovation to become a part of marketing spending in the organization.
Transparency can additionally be increased by the use of probabilistic programming. Probabilistic programming techniques, such as Bayesian models, allow collected data to be seamlessly combined with the intuitive planning and decision-making of the workforce.
Data shows that for a model to be highly effective at the analysis of impact and allocation trade-offs, the model needs to capture at least 80% of marketing investments by accounting for every customer touch-point across all relevant markets. It is not enough to measure sales impact through only one or two factors, such as paid media and promotions. Other factors such as changes in packing, use of discounts or coupons, available inventory, and movement of competitors must be integrated into the approach to avoid significant gaps in knowledge and planning.
Holistic ROMI solutions aim to successfully provide relevant insight across all of these areas. The short-term effect of a marketing initiative on revenue will still be taken into account, but the impact of this initiative on brand awareness and the role of various touch-points in the customer journey will not be missed.
Business transformation aimed at changing marketing functions for improved efficiency and measurement needs a broad focus that extends outside of new models and technology integration. As with any large-scale organizational change, a large proportion of success hinges on the ability of the organization to manage and integrate a large-scale change. An inventive operating model is required at both local and global levels to integrate and embed this data-driven thinking and decision-making within all levels of the organization, including the workforce.
In a time of unprecedented global uncertainty, planning for the future may seem redundant – but in reality, planning has never been more essential.
Although many organizations are now incorporating informed decisions in regard to marketing budgets, very few were able to measure their ROI on their marketing spends and treat this process as a priority. Throughout 2020, research carried out by Gartner discovered that just 54% of organizations based major marketing decisions on the results of data analytics.