Marketing ROI – Not Exactly Science?
There is continued discussion on whether marketing is an art or a science. The short-cut difference being that for marketing, as an art, it would be impossible to predict or measure commercial results. Whereas for marketing, as a science, it would be possible. The discussion is, however, an exercise in futility. After all, the question ‘is marketing an art or a science?’ presents a false dilemma.
To me, M.C. Escher’s work is a great metaphor for marketing. His work is as much geometry (science) as it is art. Similarly, marketing isn’t either art or science. It is both! Marketing is an art in that it relies on creativity to make a desired impact on the market – the art of persuasion. And as with all creative output, it is next to impossible to predict what that impact will be. This is because art is experienced on a subjective level.
At the same time, marketing is also a science. The dictionary.com definition of science is “knowledge, as of facts or principles; knowledge gained by systematic study.” Marketing is a science in that it gains knowledge on how to best maximise profit through increased commercial effectiveness (lower cost-to-sell, faster time-to-sell) and through the creation of new profit streams (new market/product development). Calculating marketing ROI requires a scientific approach. You need a calculation model that will allow you to quantify marketing profitability as accurately as possible.
Many marketers do not calculate marketing ROI, because they find it hard to produce objective, fact-based evidence of marketing ROI. One of the reasons for this is that they feel it can only be done if their ROI calculations are 100% accurate. And that’s impossible. Attributing profitability to marketing is NOT an EXACT science! The Merriam-Webster defines Exact Science as follows: “a science (as physics, chemistry, or astronomy) whose laws are capable of accurate quantitative expression.” Sometimes, in science, we have to content ourselves with the best possible estimate. We do it all the time. And we will accept these best estimates as long as the underlying assumptions are sound and solid.
To illustrate this: In August 2007, Dr Bill Sellers and Dr Phil Manning from the University of Manchester published a study in the Proceedings of the Royal Society of B (PRSB) – a biological research journal. They had developed a computer model to estimate the running speed of dinosaurs. Based on that model they concluded that a Tyrannosaurus rex had a top running speed of about 30 km per hour and would, therefore, be slightly quicker than a soccer player (source: BBC News, 21 August 2007).
There is, of course, no way that they could have drawn this conclusion from empirical observations. So Sellers and Manning’s model was built on assumptions that were based on fossil records of the animal shape and on the records of muscle strength & density of modern animals. According to dr Manning: “The figures we have produced are the best estimate to date as to how fast these prehistoric animals could run” (source: TimesOnline, 22 August 2007). The publication of these results in the prestigious and acclaimed PRSB would concur with Manning’s statement.
In business too, assumptions are made all the time to arrive at best estimates. When your market research firm presents your industry’s market potential for the coming years, you accept that the results aren’t 100% accurate, because they can’t be. When your finance department applies activity-based costing to calculate profit margins on a customer-level or on a product-level, you accept that the results cannot be 100% accurate. You’ll accept them as best estimates. The same applies to determining your marketing ROI.
My advice to you with regard to quantifying marketing ROI: Be practical and invest time and effort in making sound and solid assumptions that will allow you to arrive at the best possible estimate of your marketing profitability. The better the quality of your assumptions, the better the chances that your best estimate will be recognised by your stakeholders – not least of which, your CEO and CFO.
CALCULATED MARKETING SUCCESS!