Quest Continues For ROI Tool Everyone Can Handle

For all the time and effort that ad agencies and analytics firms have spent creating return-on-investment marketing models in recent years, the vast majority of their clients still have little faith in the ability to accurately link ad spending to sales. That was one of the key findings of a survey on advertising and marketing accountability conducted in April by Forrester Research on behalf of the Association of National Advertisers and Marketing Management Analytics.

MMA, now owned by Aegis Group’s Carat, underwrote the study and will, along with Forrester, reveal the full findings at the ANA’s marketing accountability conference July 20 in New York. With performance-based compensation one of the hottest of the industry’s hot buttons at the moment, the results demonstrate how difficult—and potentially incendiary—the subject is likely to be as the search continues for an ROI methodology that can effectively measure and even predict the impact of ad spending on sales.

The survey, which polled 135 senior-level marketers/ANA members, found that 87 percent of respondents have “little confidence in their ability to predict the impact that their TV advertising and marketing efforts have on sales.” But while clients are gloomy about the present state of ROI effectiveness, they also know they have to figure it out fast. More than 40 percent said they expect in the next year to rely more on advanced tools like marketing-mix models that will allow them to forecast the impact of their ad dollars.

Still, after many years and many millions of dollars spent on the research and development of ROI and accountability models—every top media agency has an ROI tool in its arsenal—some observers were quite surprised to discover that so many marketers see so much room for improvement in the field.

John Nardone, evp/chief client officer of MMA, one of the pioneering companies in ROI modeling, is one of them. Still, he’s close enough to the process to know that when it comes to ROI, many companies are at sea. He compares the progress in marketing accountability to someone who has just entered a 12-step program. “The industry recognizes it has a problem and is now taking the first step toward what to do about it,” he said.

Part of the problem, according to Nardone, is that while much effort is being expended by many companies on accountability, “it’s not organized from senior management on down. It’s organic, experimental and a lot of it is siloed within different departments, preventing a holistic approach to bring it altogether.”

Others argue that it’s just a hugely complex issue, but agree that clients need to do more.

“The relationship between advertising and sales is a very difficult one to quantify because it is not a straightforward, linear effect,” said Jim Kite, evp, director of insights, research and accountability at Publicis Groupe’s MediaVest. “If that were the case, all anyone would be doing is direct response and CRM. But brands are built over the short-term and long-term effects of advertising.”

Predictive models can be achieved, noted Kite, but they require reams of data, “not just on advertising and sales statistics, but all these other activities that range from competitive activity to weather, to distribution and price. It’s absolutely amazing how many companies that invest hundreds of millions of dollars in advertising are not actually doing continuous tracking of all these variables at the same time.”

And it’s not just small or midsized companies that are ROI-challenged. In fact, bigger companies with numerous divisions offering an array of unrelated products sometimes have the hardest time figuring out how to implement a cohesive marketing accountability process across their corporate organization.

“I can understand why companies struggle with this,” said a senior marketer at a Fortune 100 company that itself is struggling to come up with its own accountability model. “It’s very difficult to put it all in a box and say this is what we should do consistently as a marketing organization across the world.”

David Ernst, evp, director of futures and technologies at Interpublic Group’s Initiative, contended that the industry is entering a “new phase” in ROI modeling that includes efforts to measure the qualitative as well as quantitative effects of advertising on purchase behavior. “We need to go beyond regression analysis and take into consideration the effect that messaging is having on people’s perceptions of brands, and how that ultimately results in sales,” he said.

Marketing and advertising consultants however, are generally skeptical about the effectiveness of many of the ROI tools currently in the marketplace.

“The problem with all these tools is you need at least three years of tracking data to do anything with them,” said Linda Fidelman, CEO of Advice & Advisors, New York. Then there’s the issue of all of the variables that can change in an instant, rendering assumptions made for forecasting obsolete. “A little thing can happen in the market tomorrow and change every variable,” she said.

John O’Connor, president of Relevant Insight Group in Boston, said that as much as clients want accountability, many are also reluctant to reveal to their media agencies all of the proprietary sales and marketing data essential to creating tools that are meaningful. “I’ve heard concerns from clients about agency people who move around and the clients wonder whether they want that much data, potentially, out in the public domain,” he said.

Erwin Ephron, a New York-based advertising and marketing consultant, pointed to the “tremendous definitional problems” that exist within the accountability field. “It’s a good thing, but it comes in 83 different flavors,” he said. He also said one of the greatest challenges marketers face is once they’ve massaged the data with whatever ROI tools they’ve put to use, “How do you translate that back to actionable advertising decisions?” And to be at all effective, Ephron agrees with Kite that all the non-sales variables have to be tracked simultaneously.

The ANA is trying to answer some of the big open-ended accountability questions that marketers are grappling with. Barbara Bacci Mirque, senior vp at the ANA, said the organization has just created an accountability task force. The first order of business is to come up with a set of standard definitions for terms like ROI. Also on the agenda: exploring whether there’s a single ROI process that all marketers can deploy.