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ROI for Marketing: Balancing Accountability with Long-Term Needs ROI for Marketing: Balancing Accountability with Long-Term Needs By Robert S. Duboff ROI for Marketing: Balancing Accountability with Long-Term Needs By Robert S. Duboff ISBN 1-56318-075-8 © Copyright 2007 by the Association of National Advertisers, Inc. All rights in this book are reserved. No part of the book may be used or reproduced in any manner without written permission, except in the case of brief quotations embodied in critical articles and reviews. For information, please contact: Association of National Advertisers, Inc. 708 Third Avenue New York, NY 10017-4270 (212) 697-5950 www.ana.net Printed in the United States iii Table of Contents About the ANA ANA Mission Statement . .v About the Author Robert S. Duboff . .vii Foreword . .ix Chapter One Return on Investment: The ROI Conundrum . .1 Chapter Two The Nature of Marketing . .9 Chapter Three Measurement . .21 Chapter Four Decisions . .39 Chapter Five Doing Some Math . .51 Chapter Six The Path Forward . .69 Footnotes . .77 ROI for Marketing: Balancing Accountability with Long-Term Needs iv ROI for Marketing: Balancing Accountability with Long-Term Needs v About the ANA The Association of National Advertisers leads the marketing community by providing its members insights, collaboration and advocacy. ANA’s membership includes 370 companies with 8,000 brands that collectively spend over $100 billion in marketing communications and advertising. The ANA strives to communicate marketing best practices, lead industry initiatives, influence industry prac- tices, manage industry affairs and advance, promote and protect all advertisers and marketers. For more information visit: www.ana.net. ANA Mission Statement ANA provides indispensable leadership that drives marketing excellence and champions, promotes and defends the interests of the marketing community. We will accomplish our mission through: • Insights ANA advances marketing decision-making by acquiring, developing and disseminating unique and proprietary insights to ANA members. Our intellectual capital covers all aspects of the com- munications process, including brand building, integrated marketing communications, marketing accountability and the marketing organization. • Collaboration ANA consistently brings members together with industry thought leaders to promote fresh thinking, develop new ideas, provide professional training and facilitate industry-wide net- working. The ANA convenes constituents across the entire marketing spectrum including peer marketers, agencies, the media, associations, consultants, vendors, production companies and academicians. • Advocacy ANA is the voice of the marketing community. ANA leverages its leadership to advance the industry’s agenda – engineering progress and transformation while defending core marketing interests and freedoms. On behalf of the industry, we address legislative and regulatory issues, promote industry policies and practices, strengthen the marketing supply chain and align the marketing community towards solutions for societal concerns. ROI for Marketing: Balancing Accountability with Long-Term Needs vi ROI for Marketing: Balancing Accountability with Long-Term Needs vii About the Author Robert S. Duboff Mr. Duboff is a founder and CEO of HawkPartners, a marketing consultancy. His focus is helping clients develop effective marketing and communication strategies. From 1999-2001, Mr. Duboff served as Ernst & Young’s Director of Marketing with responsibility for all marketing activities of the $4 billion enterprise. He also chaired the firm’s Global Marketing Operating Committee. Prior to that, Mr. Duboff was a Vice President of Mercer Management Consulting. During his 20 years with the firm, Mr. Duboff helped launch Mercer’s marketing and market research practice, and led this unit for more than a decade. Mr. Duboff has taught numerous courses on marketing (including Communications and Promotion) and co-authored the book, Market Research Matters (Wiley, 2000). He has also written for such pub- lications as The Journal of Business Strategy, Marketing Management, The Advertiser, Across the Board and Leadership & Strategy. In May 2002 and 2003, he chaired the AMA’s first two Marketing Strategy Conferences. Mr. Duboff is a past-chair of the Board of Directors for the Advertising Research Foundation on which he served for two terms. Mr. Duboff received a B.A. from Amherst College and a J.D. from Harvard Law School. He lives in downtown Boston with his wife and their three great kids. He can be reached at [email protected]. ROI for Marketing: Balancing Accountability with Long-Term Needs viii ROI for Marketing: Balancing Accountability with Long-Term Needs ix Foreword This is a book with a point of view about ROI (return on investment) for marketing. Each phase of my career has contributed to the perspective. I started as a market research consultant, the craft that still excites me most. Working with clients, I initially learned about the uniqueness of each client (both individual and collective culture) and the importance of process. I came to appreciate that, for all the numeric aspects of market research that originally attracted me to the job, the impact of the work had less to do with numbers and more with the skill with which the numbers were developed and presented. As I migrated to marketing consulting, I noticed that being seen as a “management consultant” pro- vided access and influence with senior clients that I never received as a “market researcher.” As I moved further up the experience curve to become a “strategy consultant,” I learned how senior man- agement viewed marketing and marketers. Most felt (and still feel) that marketers in their organizations don’t really “get it.” Marketers like to spend money and talk a language of their own (“brand image” or “dynamics,” “look and feel” and the like) rather than the bottom-line language of business. It was relatively easy and natural for consultants to apply the tools of our trade (e.g., the ROI approach we applied to strategic investment decisions) to the unruly marketers. Then I became the CMO for a large professional global services firm. I tried to install the same ROI discipline I had advocated from the outside – but found it to be irrelevant to budgeting or investment decisions by the firm’s leadership. The level of marketing spend turned almost entirely on how the business was doing at the time and how active competitors were in their marketing. Recently, I’ve been teaching as an adjunct at Boston College, at MIT’s Sloan School of Management and at Northeastern University. This experience has been extremely valuable to me (and hopefully to the students as well) in terms of forcing me to really think through how marketing can and should work, and the role ROI thinking, metrics, accountability and related processes should play. I have also returned to consulting, this time with a firm that provides a range of marketing and strategic consulting, with a research fact-based perspective. My co-founder, Scott Berman, has been a great partner and contributor to this book, particularly in thinking about marketing as a portfolio. Scott and I share enthusiasm for the work, which hopefully will continue to help forge a firm that brings that passion to clients. As I write, HawkPartners numbers 17 in addition to Scott and I: Abbey Ahearn, Jennifer Anthony, Debbie Bender, Melanie Bernstein, Josh Burns, Lisa Cole, Ray George, Brooke Hempell, Jonathan Hollenberg, Lori Holmes, Susan Jensen, Nancy Neufer, Cynthia Posner, Kristin Verdiani, Scott Wilkerson, Steve Wolf and Lori Young-Oliwa. ROI for Marketing: Balancing Accountability with Long-Term Needs x While I want to thank all of them for their contribution, I particularly want to thank Susan (and her family) for her tremendous support and help over the years, including her patient willingness to work through the multiple revisions this book required. This book was also helped by a huge number of colleagues over the years, including Eric Almquist, Maureen Berman, Paul Cole, Tony Gallo, Jeff Herman, Susan Rebell, Frank Menser, Chris Meyer, Jim Speros and Lara James. A special thanks goes to Carl Sloane and Peter Temple who first took a risk by hiring me over thirty years ago. Client relationships have been instructive, too. In particular, Victor Millar, Dan Kolb, Jonathan Hayes, Dave Phillips, Nick Schiavone and Tom Friel have been a joy to work for and with. I have also benefited from the teachers who took time to really think about their messages and were willing to talk with me at all times. Hadley Arkes, at Amherst, was particularly influential. In fact, the course he taught on Public Opinion helped attract me to market research and remains an inspiration when I teach. I have also been blessed with great friends and am always comforted by talking with any of the set of three (Rich Hartz, Pete Warshaw and Dick Glover) boyhood friends whom I still see regularly. In addition, Rob Klugman and Robert Sachs have always been helpful to my thinking. My family is another source of strength. My wife, Janet Berkeley, has always been better at the num- bers than I and, with our three sons, Josh, Sam and Brett, consistently challenges my ideas. Hopefully the point of view and perspectives expressed in this book will challenge the reader and force thinking and improvements in marketing. At times, I have tried to be provocative to spur con- sideration of the argument at hand. I’m sure I don’t have all the answers; but, at a minimum, I’ve tried to raise all
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