Marketing Strategy ROI

How do you prove the ROI of marketing strategy?

First of all let’s get out of the way the confusion surrounding marketing strategy and establish what it isn’t.  It is about determining what kind of business you are in and developing long-term competitive advantage.  It is not about short-term tactics like advertising, personal selling, social media, SEO and SEM. 

The metrics for digital tactics are easier to measure thanks to advances in data collection, however demonstrating the value of strategic planning has taxed academics and marketers for years. 

How will investing in marketing strategy impact your organisation’s profitability?

The PIMs study (Profit Impact of Market Strategy) has been looking at this problem since 1972.  An analysis of 100s of businesses, the original study looked at what factors influenced ROI and found that the key determinants were:

  • Market share
  • Product quality
  • Company characteristics (size etc.)
  • Customer focus

Ideally a high market share and high product quality produces the best ROI on marketing spend, the study showed an average return of 28.3% for the dataset.

Is ROI the best measure of marketing strategy?

Rather than putting a financial value to marketing strategy you could look at it like other business processes in terms of benefits. What is the ROI for investing resource in creating a business plan for example?  Yes, you don’t necessarily need one but eventually, you may see the benefit in having one. It is the same for marketing strategy, yes you could go off and spend your marketing budget without having one but it’s a hit or miss approach to marketing.

What is the value of marketing strategy? 

  • It provides direction for a business
  • Whilst it is not a crystal ball it can help you make informed decisions about the future
  • It helps decide the allocation of resources
  • Often it’s about what you don’t do i.e. it stops you getting distracted

Ultimately, maybe that is the true financial value of marketing strategy in that it can help you avoid expensive mistakes. Although, you may only appreciate that benefit once you have made those mistakes and then decide to invest in marketing strategy. So no you don’t necessarily need a marketing strategy but without it, your business may stall or fail as it is crucial for long-term sustainable growth.

Blog post by Christine Babington Smith, an expert in marketing strategy and marketing communications.  She is the founder of Torehill, a marketing strategy consultancy which works with ambitious enterprises. Torehill’s team includes CIM trained marketers with between 10–20 years’ experience.  Our backgrounds cover London’s premier advertising agencies, PLCs and high-profile start-ups. Our consultancy services include marketing strategy advice, marketing communications, campaign planning, website development and digital.

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