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Determining the return on investment (ROI) for one's marketing dollars has always been an elusive goal. For years, the television and print advertising markets banked on the fuzzy lines between sales results and marketing efforts, and to good effect. Few ad buyers questioned the need for good branding and marketing, or forced agencies and themselves to carefully analyze results at every step of a campaign. "How often does the marketing investment result in sales?" asks Richard Vancil, vice president at International Data Corp. (IDC) in Framingham, Mass. "Classically, this is very difficult to prove."

Today, there's an easier way to quantify marketing ROI. Lightweight business intelligence (BI) tools are able to leverage Web data using rich analytics, providing a window into the previously unknown mind of the prospect.

The cost of gathering and analyzing data and taking action as a result of using these tools once was high. But costs have come down and are now within reach of just about any organization. Today's lower-cost and easier-to-use BI tools enable a wider audience of marketing people to gain new insights about their customers' response to marketing efforts and make better investment decisions.

Allocating the Dollars
One big reason executives are interested in hard ROI data is so they know where to allocate their sales and marketing budgets. For example, the average high-tech vendor spends about 3 percent of revenue on marketing and 11 percent of revenue on sales, according to Vancil. "That means they spend 14 percent of revenue on customer creation. The job of management is to say, 'Where does marketing stop and sales begin?' The best thing that can happen is that sales and marketing see eye to eye on this, but it's not common."

Increased competition and slower industry growth in high-tech and other industries will likely push those revenue percentages even higher as customer acquisition costs go up. "Every new dollar of revenue that an IT vendor creates costs more in terms of sales and marketing," says Vancil. And that makes managers even more interested in demonstrable ROI for their marketing spending.

Keeping Score
Here's an example of how the new ROI tools provide vital marketing support.

With the help of its interactive marketing agency, McCann Worldgroup, Microsoft Corporation uses "scorecards" for its marketing campaigns based on Web analytical data. Similar to the statistical scorecards used at sporting events, each scorecard quantifies the sales success from a wide mix of marketing channels and events. Looking at the effectiveness of every communication venue Microsoft uses—including print and TV ads, radio commercials, and Web banners—is a best practice across each of the company's marketing channels.

"The ability to learn from, and respond to, our marketing activities in as close to real time as possible is a huge competitive advantage for us," says Anne Groom, director of integrated marketing/communications measurement for Microsoft. If, for example, specific types of Web content are getting higher download rates, Groom says the marketing team might quickly adjust other Microsoft content to better reflect what visitors want.

McCann builds sophisticated modeling capabilities into scorecards to help its clients better understand the synergies between Web and TV advertising. Say, for example, a company wants to understand what impact a 10 P.M. TV spot running in New York City has on its Web traffic. "We run TV in certain markets and we look at Web traffic from those same markets during windows of time that those spots have run," says Joe Giannantonio, vice president and director of analytics for McCann Worldgroup in San Francisco. "That allows us to assess the incremental impact that the TV ad had. Then we run the model and we can see how TV influences traffic to the site. It's all very measurable."

What's more difficult to measure, he adds, is the influence of a particular medium on conversion rates. For example, it's nearly impossible to know with certainty that a consumer buying a product in a retail store was largely influenced beforehand by marketing messages on the Web. "We're getting close to being able to prove that but we're not there yet," says Giannantonio.

The gold standard for measuring marketing ROI occurs when you can demonstrate a cold, hard sale as the result of viewing some marketing materials. This kind of hard data is few and far between, but progress is being made. The Microsoft marketing scorecards, for instance, contain data on how many customers spend time on a Web page about Windows Vista. They also reveal how many readers click through to a specific retail partner such as Best Buy to purchase a package.

While tracking sales as a result of marketing is one way to demonstrate success with high-tech marketing, it's not the only one. Many high-tech marketing campaigns, for example, are more geared toward generating excitement among the user base, particularly the small, vocal group of influential power users. "There, we're looking for trials of the product," says Groom. "That is the kind of transaction we are trying to drive."

Internet and analytical technology have forever changed the way marketers—and their CEOs—view marketing investments. It is now possible to gain a good understanding of what drives your customer's or prospect's behavior, whether that is to try or actually buy a product.

Though setting up a system to track marketing ROI takes time, the exercise may pay dividends in terms of being able to respond to customer needs virtually in real time. Says Groom, "We use the data from the dashboard as a springboard for a discussion among marketing decision-makers to make better decisions."

Source: Microsoft.com