Wednesday, December 06, 2006

ROI in Marketing

I attended a session on ROI (Return on Investment) in marketing at the HP conference. Hopefully the presenter (who was excellent) was not put off too much by some of the views I shared. HP's focus on ROI should play right into SYNNEX's strengths because one of our goals is to be the best return for vendor marketing dollars spent.

This said, ROI on marketing is foggy at best and a myth at worse. Part of this is because I think long term and measurements tend to be short term (my long term view often conflicts with others who have shorter views)

I wrote this controversial article on ROI in Marketing a while ago that explains the pitfalls.

The Fallacy of Return on Investment in Marketing.

Return on investment in marketing cannot be measured accurately.
Do you buy a Coke because it is on the billboard; because you saw the ad on television; because you saw the Coke truck; or because the Coke machine is convenient? Was it the ad this month or last? Or was it the ad you saw when you were 10? Or is it the fond memories you have of drinking Coke? Or the nice logo?
The answer is - you probably don’t know exactly why you buy the Coke at the particular time that you do. It is a combination of all these factors that make up marketing that cause the consumer to take action.

Marketing is the battle for perception. Good marketing can create the perception needed to cause purchasers to buy.

The only type of product that can have an instant return on investment in marketing is something that is truly commoditized. If you are selling water and there is no perception that your water is any different than anyone else’s water, then if you do a marketing campaign or a promotion or a price reduction, you can shift share from a competitor. Most manufacturers should actually be spending their marketing dollars differentiating their product. It is much easier to sell “Clean Glacier” water over "bottled city" water if Clean Glacier can sell the refreshment and health benefits of their brand.

The only companies that should want to commoditize their markets are ones that are truly the lowest cost to produce (not to be confused with lowest price). To sell at the lowest price without the lowest cost is a recipe for failure.

There is a great book called Tipping Point, by Malcolm Gladwell, that talks about mavens (product experts) and connectors (natural networkers who spread the word). The thesis in the book is that getting products known by enough mavens and connectors can cause a product to "tip" and become pervasive and successful.

I sit on the board of Research in Motion (RIM). When RIM was first introducing their products, they spent most of their marketing budget on giving samples of their product to people they identified as mavens or connectors. Most stockbrokers qualified. Because the product worked well, they evangelized it and eventually that lead to more adoption and ultimate success.

A single influencer can persuade hundreds of customers to buy over a long period of time.

The purpose of marketing, then, can be to influence the influencers. Design any program with that in mind.

Marketing is also best done with multiple media. It is best to not only send a flyer but to telemarket, email, fax, press release, demonstrate products in trade show, advertise etc. The different messages reinforce each other and different people get different things from different media.

All marketing tends to be more effective if it is repeated often. It has been said that the first time a person sees something about the company, they don’t see it; the second time, they are vaguely aware of it; the third time they look at it; the fourth time, they read it; the fifth time, they absorb; and the sixth time, they buy it. All marketing effects occur over time.

Because of the difficulty in measuring ROI, some companies will just stop marketing. This is great news for those that keep marketing. In time share will shift to those that continue to invest.

I am a time management person. I pride myself in using my time well. I even authored an eBook and audio CD on the topic. People ask me why I Blog and do I get a return on the time I spend blogging. I do know it has given me a higher profile. It has added to the tradition press I get (I have been written about in the Globe and Mail, Forbes Magazine and many computer trade journals like CRN). Can I measure the ROI? No - but no long term company can measure ROI accurately.

Jim Estill is the CEO of SYNNEX Canada


At 12:12 PM, Blogger steven edward streight said...

Aha, a man after my own heart. ROI is a destructive practice in many cases. What's the ROI on business cards? New office furniture? New carpet? Designated parking spots for top executives?

What really kills me is ROI on blogs. It's more like ROT: Return on Time invested.

Keep being controversial. I'm rubbing off on you, and quite ashamed of it, too. heh.

At 12:15 PM, Blogger Jim Estill said...

I am sure you are real sorry your controverial views are rubbing off.

I should write an article on ROT.

At 3:54 PM, Anonymous Anonymous said...

How refreshing it is to read from a North American (OK, Canadian) CEO, who has a positive, LONG-TERM VIEW (of ROI and, presumably other business issues, too.) Corporations are so caught up in the quarter-to-quarter mentality, driven by the "street's" expectations, that they shy away from doing the intuitively right things. Good for you Jim! Good for Synnex, too! Cheers, Alex

At 9:55 PM, Blogger Jim Estill said...

My "Long Term" thinking often puts me at odds with people. It may be laudable but takes great resolve to stick to. We are an instant society.


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