While Board of Directors, CEOs, and CFOs these days are demanding proof that marketing dollars work, a new study reveals that 57 percent of CMOs are simply going with their gut feeling when setting marketing budgets, without any consideration for Return On Investment analysis.
The study, by Columbia Business School and the American Marketing Association found that, when asked to define marketing ROI, 82 percent of the CMOs did not comprehend that ROI requires a financial outcome. Instead, brand awareness is the only criterion many use to measure ROI. This is troubling, since awareness is a lagging indicator of brand strength. Using it as the main measure to make marketing decisions is truly managing by looking in the rear view mirror.
A quarterly omnibus survey of traditional market research is also lacking in actionability, because it does not allow for real-time decision-making. Companies are not taking advantage of the new technology as data source. They are still much less likely to collect mobile data (only 19 percent of those surveyed collect it), and social media data (35%), than they are to collect traditional customer survey data on demographics (74 percent), usage (60 percent), and attitudes (54 percent).
One of the biggest obstacles to turning data into actionable insights is the lack of effective data sharing. In the past, departments such as sales, marketing, customer service, public relations, and supply chain might each have had their own data sets, which they managed separately. But today, analytics link these data-sets together in order to better understand interactions between firm, customer, and business partners. Linking shared data at the customer-level is critical for effective targeting and personalization of marketing efforts. Unfortunately, many companies are not yet linking data at the level of the individual customer.
CMOs face a hyper-challenging environment for marketing today. Innovative marketing and effective measurement require defined marketing objectives, a focus on KPIs and appropriate metrics, and identifying which data they need.
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