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Return on Marketing Investment Project

Objective

This project estimates return on marketing investment (ROMI) for a company’s marketing activities. It combines internal data on marketing expenditures and staffing levels with external data on economic and market conditions, relative prices, and underlying trend factors to assess the impacts of multiple factors – including marketing – on total sales. The analysis quantifythe contributions of each external and internal factor.

Problem

CMOs and other marketing leaders are under increasing pressure to show a return on their activities. The purpose of ROMI is to measure the degree to which spending on marketing contributes to sales, revenues, and profits. Organizations use various methods to estimate the return their investments in individual tactics and on total marketing activity, but often their approaches omit factors that hold the key to accurately measure marketing effectiveness.  

Solution

For this custom consulting engagement, SiriusDecisions Consulting uses a comprehensive, long-term approach to analyzing and estimating ROMI. To accurately assess marketing’s overall contribution, external factors must be included in the analysis.

  • First and foremost, this includes underlying economic and market conditions and their changes over time. Companies that buy products and services impose planning parameters on buyers, and these guidelines are tied to expected company business performance. If their markets are performing well, then their purchases of products and services increase. If not, then additional purchases stabilize or fall. Companies that sell products and services will be affected by these changes.  

  • Another factor that must be included is relative prices, since buyers make purchase decisions partially on the prices that they need to pay relative to the prices of other goods and services that they could buy.

  • Technology, competitive, and other trends should also be included.

Measures of marketing activity are then included to gauge their contribution to financial performance. Sophisticated business analytics tools ensure that each factor included in the estimated equation are relevant to the analysis, appropriately sized in terms of their impacts, and objectively distinguishable from the other factors.

This project will answer the following questions:

  • How much does marketing contribute to the company's financial performance?

  • How does this impact change over time?

  • Does the estimated contribution exceed the cost of marketing?

  • How does marketing's contribution compare to other major drivers of the company's sales, revenues, and profits?

Who Should Participate?

This project will answer the following questions:

  • How much does marketing contribute to the company's financial performance?

  • How does this impact change over time?

  • Does the estimated contribution exceed the cost of marketing?

  • How does marketing's contribution compare to other major drivers of the company's sales, revenues, and profits?

Typical Prerequisite Work

To prepare for this project, SiriusDecisions will work with the client's project team to collect and review base line data such as the following:

  • Data on the company’s marketing programs, total   marketing expenditures, paid advertising expenditures, IT expenditures, other marketing expenditures, staffng levels, and average selling prices at a monthly frequency for at least 2 years but preferably 3 or more years

  • Current and historical external data on economic and market conditions for specific industries and countries, relative prices for specific products/services and groups of products/services, and underlying trend factors at a monthly frequency for 3 years or more

  • Relevant content from the SiriusDecisions repository for team members to review 

Typical Project Deliverables

Key deliverables from this project will include:

  • Detailed description of the data, statistical methods, and analytical results using mutually agreed report formats

  • Project related SiriusDecisions research materials

  • Ongoing support to answer questions, discuss methods, make recommendations, provide guidance on next steps

Sample Timelines

Weekly or bi-weekly status meetings ensure open communications with the client and keeps the project on track for timely completion.

Consulting Process and Data-driven Methodology

Projects begin with a kickoff that includes clear outline of the detailed approach, schedule of status updates, next steps and deliverables. The SiriusDecisions Consulting process outlined below guides clients through a set of coordinated steps and milestones to a successful outcome. One of the most important steps is the "review and revise" phase, which allows initial feedback to be incorporated into the development of a final set of prioritized recommendations and deliverables. All process steps and milestones are designed to work in concert to apply operational intelligence, SiriusDecisions frameworks, models and best practices to create actionable plans and results.

SiriusDecisions Consulting leverages a unique methodology for collecting insights about the current state of an organization and then comparing these findings to similar organizations. The SiriusIndex™ is used to compare best practices achieved by a peer group (organization size, industry, go to market approach, etc.), relative to the current CMO results as well as best in class organizations. These comparisons provide context and inform recommendations  in both an interim review and final report. Final reports are typically presented in an onsite working session followed by a final PowerPoint report and relevant SiriusDecisions research.

Scalable Solutions to Help B-to-B Leaders Grow Their Business

SiriusDecisions provides research-informed consulting services that operationalize our market-leading models, frameworks, best practices, benchmark data and research to address business problems or opportunities and drive profitable growth. With SiriusDecisions Consulting, you will broaden understanding, adoption, application, utilization and impact of SiriusDecisions methodologies within and across teams and go-to-market ecosystems.






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