One of the greatest challenges for any good marketer is discerning between trends and transformations. They often look and feel the same at the start, moving through the world of marketing like a virus until everyone is speaking the same 3-letter acronyms—like CRM, CMS, SFA. But while a trend heats up and cools off, a transformation continues to simmer, ultimately changing the practice of marketing. One such transformation is brewing right now, which many have written off as a trend. Don't make the same mistake. The next time you hear “ROI,” resist the temptation to roll your eyes, and think instead about the impact those three letters will have on your career. If you're in marketing, the impact will be dramatic.

Roi Means Accountability

Beyond the cookie-cutter positioning statements that promise “maximum Return On Investment”—a trend which will die too slowly—the ascendance of financial terms into marketing language is a signal of the growing pressure to quantify the financial value of each marketing investment.

For hard-driving businesses, ROI means nothing less than accountability. If I give you a dollar, I expect a dollar-fifty in return.

The sudden celebrity of ROI is due largely to the excesses and failures of the recent boom and recession—which is why many call it a passing trend. But the real pressure for accountability is being driven by factors far more durable than the cycle of our economy, namely: advancing technology and increasing market complexity.

Technology Makes it Possible

There have been numerous attempts to quantify ROI in marketing, dating back at least to the early 1900s, when direct marketers tracked responses to advertising.

But most marketing return analysis has avoided financial measures for MROI and concentrated instead on "softer" qualitative measures such as awareness, attitudes and recall, while many growing businesses routinely neglect any marketing measurements at all.

Today, data-mining and tracking technology are sophisticated enough to bring us within reach of accurately tying customer behaviors, actions and revenue to specific marketing programs.

And by technology, I don't mean just software and systems, but the science of how to track and mine data to extract meaningful knowledge. If you doubt the increasing sophistication of marketing science, do a Google search on “Market Basket Analysis,” an area of intense academic research focusing on complex marketing mathematics.

The writing on the wall is obvious. As technology advances our ability to track behavior—and to provide models where tracking isn't possible—businesses will increasingly migrate towards marketing activities that can be measured.

I'm not saying this is unequivocally good; I'm saying it's inevitable.

Media Makes it Complex

Even as our ability to track customer behavior grows, the media space is becoming more complex, with innovations in communication channels continuing to grow. The choices available to marketers for reaching out to their audience are complex, confusing and subject to constant change.

To build an effective marketing mix in such a complex and changing environment is a challenge to the capabilities of any marketer. Though many savvy marketers understand the need for performance measures to guide their decisions, simply generating data doesn't provide the clarity needed for key decisions.

You may know, for example, how many leads were generated by your last email campaign. But do you know how many leads will turn into sales?

Do you know what the lifetime value of those sales will be to your business? Do you know how the value of those sales compare to potential sales from other available channels?

Such complexity explains why many of today's most successful marketing programs are incorporating more of a business mindset. In the right hands, a focus on ROI doesn't just make the marketing function a bean-counting performance-oriented revenue driver, it makes you accountable for knowing and serving your customers well.

Get to Know Your Customers

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ABOUT THE AUTHOR

Christopher Kenton Mr. Kenton is president and senior strategist at Cymbic, a full service marketing agency and consultancy (www.cymbic.com). Cymbic specializes in positioning and marketing technology products and businesses. He can be reached at ckenton@cymbic.com.