How Does Technology Change the Way Marketers Measure Outcomes?

Gordon Wyner
Marketing News
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Key Takeaways

What? Changing technology necessitates a new perspective on what markeitng ROI looks like and how it's measured.

So what? Digital marketing, mobile marketing, Big Data and artificial intelligence are fundamentally different from history, making them hard to measure against historical data.

Now what? Marketing experts need to be open to more development in the thinking and tools needed to create insights for a future that is increasingly hard to predict.

​Nov. 1, 2017

As marketing advances with technology, businesses must reconsider how they evaluate its ROI

Marketers have focused on the links between their actions and financial performance for two decades. There’s been considerable development of tools on the practitioner side, as well as implementation of financial management within companies. Academic researchers have improved their strategic understanding of the role of marketing by studying its impact on customer behaviors and financial measures. They’ve gained clarity on how marketing experience and skills contribute to successful financial management. However, marketers may see a new set of priorities emerge due to technology. What made sense in the past may not work for marketers in the future.

Accumulating studies pinpoint the impact of increasing numbers of marketing drivers, customer behaviors and resultant financial outcome metrics. For example, the list of potential drivers has expanded to incorporate many digital and mobile marketing investments in new formats, delivered through new media platforms and sales channels. We understand more about intermediate steps in the process leading to financial outcomes, such as customer satisfaction. Our comprehension of the effects of marketing is becoming more refined, often including both impact on financials and how marketing responds to financial performance.

Understanding marketing impact often includes both the macro view at the market level over time, and the micro view at the individual level, such as customer segments or purchase occasions. Understanding costs is also becoming more explicit in research, where cost elements are identified within total economic value measures to isolate marketing’s impact from things that are outside of its domain.

Converging evidence shows that management executives and board members with marketing experience contribute in positive ways to business performance. This has implications for recruiting, selecting and training people in marketing to achieve business improvements.

Going forward, we need more insights on business questions as currently defined, based on research of new strategies, drivers and talent. However, we may also need to get new perspectives on what marketing ROI is by asking different questions.

Business decision-makers need guidance to manage financial performance. This can come from tools that enable them to experiment with alternative actions via simulation or further data analysis. Research into data visualization and dashboards could be useful for this purpose. Flexibility in changing inputs and assumptions is key. Precision is less relevant since this is about predicting an uncertain future. The priority is potential financial benefit and risk to the business under alternative scenarios.

No single marketing analysis tool will be the determining factor in decision-making. Companies have a portfolio of decision options. While some may represent large investments and happen quickly, others will unfold over time and require numerous adjustments.

Implementing a strategic decision may require another level of support to manage the intervention. For example, when J.C. Penny switched to everyday low prices and discontinued price discounts, its executives didn’t consider potential resistance from customers. When Netflix pivoted to online streaming, its executives didn’t anticipate the impact on the legacy business. These interventions might have been more effective if marketers had gamed out unintended consequences and how to work through them.

Much of the available research on financial performance is based on relatively stable markets and companies. This stands to reason since there’s a compelling need to draw on historical data to understand what works. However, digital marketing, mobile marketing, Big Data and artificial intelligence are fundamentally different from history.

Ad spending, for example, has shifted toward digital, which now exceeds TV ad spending. The change is shifting the variable costs of advertisers for different types of impressions. More ad buying is taking place on digital platforms. The nature of creative development is changing to adapt to new media. The number and types of people required to work on this part of the marketing process are different. From a marketing ROI perspective, the cost base of existing business models is changing for advertisers, creative and media agencies, research firms and support services. At some point, this is a change in kind, not just degree.

This type of structural change should be examined for all of the cost drivers in marketing ROI work. The sales force is one of the most powerful elements of the marketing mix. How does this change when digital technology influences B-to-B selling with more digital content, more AI and CRM software and fewer salespeople?

A more radical change in kind is the shift in business models by disrupters. How many companies will fundamentally alter the structure of the market like Google, Facebook, Amazon, Uber, Netflix and Airbnb? These companies created new industries and new competitors, and they impact the marketing activities of other industries. Facebook now leads the mobile advertising category, something that barely existed five years ago.

How many successful disrupters will continue to disrupt? Which of the large-scale moves—such as Amazon’s foothold in bricks-and-mortar stores or Google providing ordering services for Walmart—will endure?

What’s the likely impact of new business strategies reported in the press? Will Facebook invest substantial sums in acquiring video content and compete with Netflix, Amazon and HBO? Would this change Facebook’s revenue model from its current base in mobile advertising to other forms, such as consumer subscription? How would this change advertisers’ plans for content creation and implementation?

Apple is poised to make significant investments in augmented reality for its phones. In addition to stimulating demand, how will this feature impact advertising, sales and customer management applications for marketers?

Marketers must still answer traditional ROI questions in markets that are less affected by digital transformation, but more firms will be touched by structural changes, requiring new questions to be asked. It’s likely that the available marketing mix will be quite different five years from now.

Once companies accept that marketing expertise is valuable, what do they do next to outperform their competition? How should they deploy their resources to build or buy organizational capabilities? This entails costs for recruiting, training and acquiring companies with marketing skill. This requires different managerial skills to manage such talent, especially if it’s new to their company culture. How do they ensure that the marketing orientation they are seeking gets infused into the daily operations of the business?

Lots of progress has been made in linking marketing with financial outcomes of firms. The future promises more change, both evolutionary and revolutionary. Marketing experts need to be open to more development in the thinking and tools needed to create insights for a future that is increasingly hard to predict.


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Author Bio:

 
Gordon Wyner
Gordon Wyner is research director at the Marketing Science Institute.
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