Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability
by James D. Lenskold
Lenskold provides models to evaluate the expected return on investment (ROI) and profitability of marketing campaigns under consideration. The author rightfully points out that the net present value (NPV) of gross margin—not revenue—is the basis for these calculations. Campaigns with an ROI lower than the cost of capital will be rejected. Remaining options can be prioritized in favor those with the highest ROI.
The models all include projected results of the campaigns. Projections can be based on historical results or tests. While reading the book, I was thinking that companies not already using an ROI approach to make marketing decisions probably lack historical data to correlate sales with specific marketing investments, making accurate projections difficult to say the least. But you’ve got to start somewhere.
Another challenge that comes to mind is the long sales cycle of a big-ticket product. The customer may be influenced by a variety of exposures, such as advertising, direct mail, and tradeshow presence over a long period of time. The author does cover residual value (the impact one marketing investment has on the performance of future investments) and the effect of integrating campaigns versus implementing them independently. However, it may be impractical to compare control and test groups. I think understanding your sales process and making informed judgments is smarter than being a slave to imperfect data.
What about brand awareness advertising, that has no measurable linkage to incremental profits? Lenskold writes, “The short-term financial value of awareness is $0.”
Lenskold’s writing style is dull, but the content is intelligent and thorough.
Lenskold, James. Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability. New York: McGraw-Hill, 2003. Buy from Amazon.com