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Return on Marketing Investment (RMI)

6/28/2012

 
by Seth Temko

A common mistake that businesses make is to NOT view marketing efforts as a business investment.  An investment is a use of cash/capital with a tracked and expected return.  Too often companies make some key mistakes which are simple to correct.  All you need to do is turn on your finance mind.

Summary of Actions
  1. Every marketing effort should have a financial goal.
  2. That financial goal should be in a defined period.
  3. Indirect costs should be at least noted if not included into the cost calculations of the project.  People are expensive and salary costs shouldn't be ignored.
  4. A clear revenue contribution method needs to be determined.
  5. A review needs to be scheduled between the finance group and marketing to determine the financial success of the project.

Background for Actions
Too often marketing is given "creative" free reign.  I'm not bashing creativity, it's a wonderful part of successful marketing. "Branding" efforts often become an excuse for not clearly defining financial goals and returns on marketing efforts.  In almost every case this should not be valid. Financial tracking of marketing efforts should become a discipline in any company. 

Some efforts are easier to track than others.  For example, direct mail that has a special phone number, unique online discount code, etc. can be directly tracked for sales results.Online marketing has been able to introduce exacting standards for tracking marketing performance.  Every email receipt, clicked link, shopping cart item bought or abandoned is recorded in a database.  Certainly that level of detail is wonderful but not cost effective or even feasible with traditional marketing. Business development efforts, trade shows, bill boards, direct mail, radio and television ads all need the discipline of financial goals, analysis and returns.

The Results

If you're in finance using this method you'll finally feel like you have a financial understanding of how marketing efforts are helping contribute to the bottom line and you'll be able to articulate and collaborate well with the marketing group.

If you're in marketing and you're reading this you might be a bit angry with me at this point.  After all having financial consideration in marketing efforts can reduce creativity and increase bureaucracy and indeed you're right.  But here is the vast benefits to marketers.  If you can prove the direct financial benefit through your marketing efforts you're going to become an undeniable hero, you're going to have job prosperity and you'll significantly reduce the risk of having your budgets and staff reduced.

Those are some pretty big wins.

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