The following is a reflective account for a debate which took place at Kingston University – Kingston Hill.
The Motion discussed: Marketing does not deliver a good return on investment.
A debate was discussed as to whether marketing delivers a good return on investment, or not and was supported by academic literature and secondary research. Initially, I was against the motion as my concluding thoughts on research indicated that marketing’s return on investment (MROI) doesn’t necessarily reflect on the overall performance of a company, although it allows managers to select more profitable levels of promotion (Mitchell and Olsen, 2013, p. 435).
Marketing provides the opportunity to capture insights of the connections between consumers, places and interests (Marshall, 2013, p. 1). These insights can be reported to marketeers in real time, enabling an efficient analysis on the success of marketing investments (Marshall, 2013, p. 1). Most importantly, like no other function within organisations marketing can subsequently drive sales and provide opportunity to effectively define brands (McLaughlin, 2011). For example, a debater stated that a marketing agency called Precision uses a strategy called the ‘Precision solution’, which analyses consumer attributes in order to create sales lead efficiency (Precision, 2015). They used this solution for a sport events company namely The Phoenix suns, in which they found that customers from a particular post code were highly probable to purchase tickets (Marshall, 2013, p. 4). Subsequently, through direct marketing the consumers matching this profile were targeted, and the company were able to increase their sales revenue by 35% (Marshall, 2013, p. 4). From this argument, I would agree that marketing is able to produce a positive financial return on investment with the appropriate use of marketing techniques.
However, it was argued that marketing does not deliver a good return on investment, both financially and non-financially. In fact, it was stated that both of these aspects could be decreased through the use of marketing. For example, a debater argued that marketing techniques used to increase customer loyalty do not provide a good return on investment, as “loyal” customers are usually aware of their own value towards a firm (Kumar and Rajan, 2009, p. 1). Subsequently, they demand a premium service, lower prices and only spread positive word of mouth if they feel and act loyal (Kumar and Rajan, 2009, p. 1). To support this, another debater discussed research conducted by Tipton, Bharadwaj and Robertson (2009) which found that marketing could decrease the value of a firm if they are involved in deceptive marketing practices. As these could be exposed by regulatory agencies, for example marketeers may use unsuitable measurement metrics to indicate over performance of an organisation to attract investors, which if exposed could devalue a brand (Ambler & Roberts, 2008, p. 737). From this argument, I would agree that marketing actions implemented to gain a positive return on investment are occasionally opportunistic.
However, I would disagree that MROI does not provide good financial returns, as my view was further strengthened by a debater who argued that companies could increase MROI through maximising their customers life time value (CLV) (Ryals, 2012, p. 42). According to Kumar and Rajan (2009) this can be done through nurturing customers through a CLV approach, which consists of analysing which customers are the most profitable and then allocating resources effectively on these consumers. I supported this argument with practical evidence of a large high tech company who used the CLV approach to target consumers, which increased their customer’s life time value by 45%, in comparison to those targeted with traditional marketing metrics (Kumar and Rajan, 2009, p. 2). Debaters did not have a strong argument against my statement, as the opposing debaters often stated superficial arguments with no practical evidence, which affected their persuasiveness.
Final implications focused on metrics which were most effective in proving that marketing delivers a good return on investment. A debater against the motion stated that the most traditional metric is often sales, whether this is expressed as turnover or volume (Ambler and Roberts, 2008, p. 735). For example, it was stated that Buzzell and Gale (1987) found that market share was a key metric which was able to drive MROI. However, the opposition debated that later research from Gale (1994) showed that market share and profits were driven by product or service quality. Conversely, debaters argued that MROI is often projected over several years, therefore this must be considered when analysing MROI. This discussion lead to a debate in itself as to whether marketing is an investment or not, as some argued that marketing is treated as a direct cost and is crucial for an organisations success (Ambler and Roberts, 2008, p. 736). While others argued that marketing is an optional extra for an organisation, which has a lack of documentation of its financial effects (Gronholdt and Martensen, 2006, p. 243). From these arguments, I would agree that MROI does not always reflect on a company’s overall performance, however this could be due to companies using unsuitable metrics in the aim of achieving their marketing objectives.
Marketing is able to deliver a good return on investment and can be achieved through thoroughly planning campaigns and observing the behaviour of millions rather than the self-reported behaviour of thousands (Marshall, 2013, p. 3). As well as measuring the responses to campaigns to determine marketing successes and optimising these marketing efforts, and acquiring timely data which are current to the changes in consumer behaviour (Marshall, 2013, p. 3). These marketing processes were not discussed which could have influenced the overall impact of the debate. A discussion on these processes could have critiqued marketing techniques which create a good return on investment and those which are unsuccessful.
It was a challenging debate as evidently debaters had different views of the purpose of marketing, as well as what is considered as a return on investment. Although, this was to be expected as a director general of the UK institute of public relations stated that if you were to ask 10 marketing professionals to define ROI, they would all give you ten different answers (Ambler and Roberts, 2008, p. 737). Taking this into consideration, I still believe that the debaters supporting the motion were less persuasive, as they often stated opinions which were actually supportive of the opposition. However, these opinions could not be validated and therefore the credibility of their arguments were damaged.
Subsequently, without practical evidence and credible theory to support that marketing does not have a good return on investment, my position on the debate has not changed and has strengthened. Although, I am aware as result of the debate and secondary research that there is a lack of literature which provides criticism on MROI.
Ambler, T. and Roberts, J. (2008) ‘Assessing marketing performance: Don’t settle for a silver metric’, Journal of Marketing Management, 24(7), pp. 733-750.
Buzzell, R. and Gale, B. (1987) The PIMS principles: Linking strategy to performance. New York: Free Press.
Chen, Y., Ganesan, S. and Liu, Y. (2009) ‘Does a firm’s product-recall strategy affect its financial value?’, Journal of Marketing, 73(6), pp. 214-226.
Gale, B. (1994) ‘The importance of market-percieved quality’, Brand Power, 1(1), pp. 65-84.
Gronholdt, L. and Martensen, A. (2006) ‘Key marketing performance measures’, The Marketing Review, 6(1), pp. 243-252.
Hanssens, D., Rust, R. and Srivastava, R. (2009) ‘Marketing strategy and wall street: Nailing down marketing’s impact’, Journal of marketing, 73(1), pp. 115-118.
Kumar, V. and Rajan, B. (2009) ‘Profitable customer management: Measuring and maximising customer lifetime value’, Management Accounting Quarterly, 10(3), pp. 1-18.
Marshall, S. (2013) ‘Increase return on marketing investments by measuring the previously unmeasurable’, The Advertising Research Foundation, 8(1), pp. 1-9.
McLaughlin, J. (2011) Forbes: What is a brand, anyway?. Available at: http://www.forbes.com/sites/jerrymclaughlin/2011/12/21/what-is-a-brand-anyway/
(Accessed: 27 February 2015).
Mitchell, T. and Olsen, H. (2013) ‘The elasticity of marketing return on investment’, Journal of Business and Economics Research, 11(10), pp. 435-444.
Precision (2015) What we do. Available at: http://precisionmarketinsights.com/what-we-do/ (Accessed: 27 February 2015).
Ryals, L. (2012) ‘Managing customers profitability’, Warc Best Practice, 1(1), pp. 42-43.
Tipton, M., Bharadwaj, S. and Robertson, D. (2009) ‘Regulatory exposure of deceptive marketing and its impact on firm value’, Journal of Marketing, 1(1), pp. 227-243.