The ROI of marketing in 2016: Some expert insight

Compiled by Matt Sabo, Consociate Media Writer and Strategist

To get a sense of what marketing return on investment looks like in 2016, we picked the brains of our own Consociate Media Partner Rudy Heinatz, as well as Nix co-founder Josh Rowe.

Both Heinatz and Rowe have MBAs — Heinatz from the Mason School of Business at the College of William and Mary and Rowe from Northeastern University — but they have very different professional careers.

Before joining Consociate Media, Heinatz spent 10 years as a healthcare executive where he researched gaps in the market to develop new service lines, led a team of 100, oversaw a seven-figure construction project and ran a multi-million dollar operating budget. He earned his undergraduate degree in business and marketing from Christopher Newport University.

Rowe has spent a career in sports marketing, working at Nike for more than a decade in various marketing capacities to include managing Nike’s stable of elite track and field athlete, to managing the sports federations of countries, to overseeing Olympic Games marketing efforts. At Nike, Rowe co-founded the popular BorderClash event and created the Nike Cross Nationals. In 2009, Rowe moved to Boston to drive marketing for New Balance. Last year, Rowe left corporate America to co-found Nix, a sports-related startup out of the Harvard Innovation Lab.

Consociate: What’s your big-picture view of marketing ROI?

Heinatz: For me, the ROI is so much about brand building. The metrics that we traditionally use for ROI are arbitrary to a great degree. It’s nearly impossible to calculate, unless you have very specific parameters, like an all-online retail outlet and a true e-commerce business if you are viewing ROI simply in terms of dollars. Then that’s easy to calculate. You can see that you had $10,000 from a specific post, for example.

Billboards are the classic example of ROI you can’t measure. Someone along the line used a clicker to count cars and exposure. But these days, for the most part, cars are single-occupancy. And if there is someone else in the car, the chances are pretty good they’re on their smartphone or tablet or whatever and not even paying attention to billboards on the side of the freeway. The ROI metrics on billboards are completely speculative.

Print ads are another example. With a print ad, whether it’s a magazine, or newspaper, you hope that someone will land on your page and that one single exposure will promote action. But with digital, you can do demographic targeting and measure the metrics to gauge reach, audience, response, click-through rates and many other things. It’s a whole new paradigm. Because so much of our lives are spent online, the targeting can go well beyond age and gender. Information such as personal interests and spending habits are now in play.

Companies need to view to a certain degree that most of what you’re doing is brand building and use topline revenue increases over time as the ROI.

Rowe: In my mind, marketing and brand building are long term investments.  So often executives look for marketing to drive sales and they look for a vehicle that says, `I’m going to invest X and get Y.’ It’s not easy.

For me, the key to ROI — or measuring the success of any marketing effort — is clearly defining the goal of the campaign or marketing effort before the investment. This is the only way to identify if the effort was successful or not. If the goal is brand awareness, do some research to find out what the current brand awareness is, then put down a measurable goal for what you want awareness to be after the campaign.

If the goal is a positive sales increase, this is easy.  Did sales go up more than the marketing investment? If the goal is drive traffic to our website, that’s pretty easy to measure. A successful “return” doesn’t always need to mean immediate sales.

Consociate: If you don’t have a positive ROI on a campaign, does that mean it’s a failure?

Heinatz: That all depends on what a company is using as the ROI. For instance, if a campaign produces no significant increase in customer base long term, but has a short term impact on sales that may or may not be considered a success. On the other side, a campaign may produce zero short term sales gains but could have a significant impact on brand reach and recognition that produces new sales in the future. Is that a failure or is the lifetime value of a customer more important than the projected goals of a campaign?

So much of this involves the goals of the company, the targeted outcomes of a campaign and, to a large degree, the type of business. A cereal brand can much more effectively gauge the success of a specific campaign based on the immediate impact on sales versus a luxury automaker.

Rowe: No, positive ROI doesn’t mean it’s not a great program. ROI is only one metric in the marketing evaluation tool box. Brand engagement, brand affinity, willingness to consider or willingness to purchase are also critical long term metrics.

If you find a marketing vehicle that actually drives a positive direct ROI — I would not call this a unicorn, but definitely an elusive rare bird — hold onto it and treat it well. So often brands kill it by doing too much with it or trying to replicate it. Nike and their `Run Hit Wonder,’ for example. It was a great race concept that worked perfectly in Los Angeles. They took it global and simply couldn’t replicate the magic they made in LA. On the other hand, there was so much demand to do BorderClash’s all over the country (BorderClash is an annual post-season high school cross country race held at Nike World Headquarters in Beaverton, Ore., pitting All-Star teams from Oregon and Washington against each other for state supremacy) but we knew there was no way we could replicate the magic, so we said no. That event today stands as one of the best Nike events they do. In footwear, Nike is also the master at allocation and keeping demand strong. They could make millions of Jordans or Air Force Ones and kill the franchise. But by putting out only thousands each year — not millions — they keep them special.

Consociate: How do you measure the ROI on social media?

Heinatz: To a large degree ROI on social media is such a long term game that quantifying it is challenging at best with the exception of a very targeted ad campaign, – I want to sell 1,000 units in the next 90 days type of thing. Social is about putting in the time and effort to build your brand. Taking the time to develop interesting content that works within the specific platform to drive attention and awareness. With literally millions of sites, companies, platforms, etc. jockeying to win the attention war, it may take a company months to gain any traction – if not longer.

In looking at it simply in dollars, a company may have a negative ROI on social for six months to a year before it really starts to see positive revenue effects. Does that mean the first six months were a waste? Of course not, they are necessary to earn your place on the attention graph of he consumer.

Rowe: Social media is another perfect example of how marketing investment does not necessarily translate into direct dollars today. Brands with huge social media footprints have the ability to control and direct the conversations with consumers in ways that others don’t. This leadership is critical to long-term brand equity and therefore success of brands.

Consociate: What are some specific examples from your experience, whether it’s in health care, or athletics and running, or some other industry, of campaigns or brands and brand awareness that work or don’t work?

Heinatz: For me, one of the best examples of a brand that is crushing the awareness game is GoPro. Granted, as we live in such a visual world, they have a hefty advantage because of their product. But virtually all of their branding and marketing activities revolve around simply showing the audience what the product is capable of. This is really evident on their social platforms. There are very view sales driven calls to actions, they simply share great content based on the product. They do a tremendous job engaging with their communities and essentially invite their fans to be a part of the brand by submitting their own pictures and videos.

Rowe: Reebok is classic for mass media campaigns that drive footwear sales. The problem is, they have little brand equity, so as soon as you turn off the TV ads, the sales stop. Yes, they see an ROI from the campaign, but is that a good use of funds long term?

When it comes to sports marketing, Lebron James, Michael Jordan, Tiger Woods, Kevin Durant, Kobe Bryant and Steph Curry are about the only professional athletes that drive a direct ROI for footwear companies. No Serena Williams. No Roger Federer. No Tom Brady. These three are among the largest global sports starts today, yet they do not directly drive purchases of shoes and apparel that equals their endorsement salaries. So why do Nike, adidas, Under Armour and others continue to pour hundreds of millions of dollars into sports marketing? Because it builds brand equity. And over time, brand equity builds businesses.

Another example. In the running industry, New Balance was known as an `old man’s shoe.’ And still is largely outside the vertical running world. New Balance knew that it needed to do something to get the brand younger and more gender diverse. So they invested approximately $1 million in young female distance runners. Stephanie Garcia, Kim Conley, Emma Coburn, Jenny Simpson, Brenda Martinez, Nicole Bush and Sarah Bowman do not sell a single shoe by themselves. Okay, maybe a few people buy NB directly because of Jenny, but that’s about it. BUT, together this effort completely changed the perception of NB. And NB running shoe sales went up by millions of dollars. Not `this quarter.’  And not `this year.’ But certainly over two or three years.

 

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