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ROI Becoming Increasingly Important to Marketers

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Return on investment. In recessionary times,  accurate measurement of ROI with respect to marketing dollars has become the holy grail. At its purest level, one part of the equation for 963825_whiteboardreturn on investment regarding marketing expenditures can be measured by total sales.  While not many people will debate the total revenue figure, there is plenty of disagreement about how to measure marketing costs. Should it include only media? Or should the figure be fully loaded with salaries and benefits that accrue to the marketing, public relations and customer service departments?

Nielsen Analytic Consulting recently released its own take on the topic. The firm does not disclose how it measured the number but reports that  “the average short-term return on marketing investment (sales return with three months of media execution) is 1.09.”

Nielsen analysts also note that not all forms of marketing have the same ROI. Global benchmark studies conducted by the firm reveal the following statistics based on ROI of marketing dollars spent:

  • Online Ads: $2.18
  • Co-op programs: $1.74
  • Promotions: $1.19
  • Magazines $1.12 ($0.45 longer term)
  • PR: $1.05 ($0.85 longer term)
  • TV Advertising $0.94 ($1.22 longer term)
  • In-store programs: $0.84
  • Outdoor ads: $0.34
  • Newspapers: $0.24

Given these statistics, Nielsen believes there’s room to improve the overall 9% return.  Analysts recommend employing the following tactics to improve ROI:

  • Consider both the short and long-term sales impact of marketing
  • Marketers must choose the right portals and campaigns to achieve successful outcomes from online campaigns
  • Magazines can be particularly useful when targeting specific demographic or segment groups
  • Campaigns should enhance a brand’s halo effect through consistent portrayal of factors such as packaging and multiple products within the brand
  • To date, TV remains the best influencer, especially long-term, of awareness and loyalty
  • Marketers can leverage influence by reaching consumers through a mix of media
  • In-store marketing is often more effective than excessive discounting
  • Using an expensive strategy such as a gift pack can generate early brand loyalty and higher sales

Nielsen analysts recommend that marketers measure ROI on their campaigns. But keep in mind that not all measurement strategies are equal. And outside influences also play a part. For example, campaigns launched in developing markets such as China naturally have a higher ROI than in saturated markets such as the U.S.

The important point is that marketers can develop measurement metrics and use them consistently from year to year. This strategy will help companies adjust their marketing programs and ensure the survival of the fittest.

[Source: Is Your Marketing Investment Delivering Expected Returns, Nielsen, Fall 2009]
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-owner of several small businesses in the health care services sector.

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