The Right Way To Calculate Marketing ROI

Today, accountability in marketing amounts to table stakes. Companies expect CMOs and other marketing leaders to provide quantifiable evidence (not squishy metrics such as views and eyeballs) that marketing investments are contributing to real business outcomes.

In the quest for quant-based proof, one of the most popular metrics for marketers to invoke is ROI – or, more precisely, marketing ROI (MROI). Trouble is, MROI (alternatively called return on marketing investment or ROMI) is defined differently, measured differently and used for different purposes, resulting in what we might call “ROI Anarchy” across the marketing landscape. This makes the task of connecting marketing to revenue or other business outcomes even more difficult than it already is or should be.But there’s hope. In a newly-published paper, four marketing science and academic gurus have tackled the tricky topic of clarifying both the concept of MROI and how companies should go about measuring and applying it.

There's a cure for MROI Anarchy

Paul Farris of the University of Virginia’s Darden School of Business, Dominique Hanssens of UCLA Anderson School of Management, James Lenskold of Lenskold Group, and David Reibstein of The Wharton School, teamed up to tame MROI turmoil and create a common approach to what may be the marketing profession’s most critical, high-level productivity metric.The quartet’s analysis appears in just the third issue of a major new professional journal called Applied Marketing Analytics, published by UK-based Henry Stewart (see below for how to download a complimentary copy of the full paper).

By Daniel Kehrer