Definition of 'Return on Investment' Confuses US Marketers

23 July 2004

A lack of consensus among major US advertisers on how to measure or define their return on marketing investment was revealed Wednesday at the Marketing Accountability Forum in New York, organized by the Association of National Advertisers.

A survey of fifty four ANA member companies uncovered a wide range of differing views as to the meaning of ROI and marketing accountability.

The results of the survey were presented to the forum by Jim Nail, principal analyst at Forrester Research. Over three quarters of the respondents (78%) found such measurements to be 'somewhat' or 'very' difficult, he reported. Likewise, in answer to a similar question, 70% found it 'somewhat' or 'very' difficult to gain agreement on the definition of ROI.

Commented Nail: "Measurement continues to be the hardest task in managing marketing campaigns. This survey shows a clear trend that marketers are applying more sophisticated techniques and specialized expertise to answer the age-old question: 'Which half of my advertising is wasted?"

The survey asked marketers: "Which of the following, if any, is closest to your company's current definition of "marketing ROI"? Percentage results are parenthesized ...

• Incremental sales revenue generated by marketing activity (66%)

• Changes in brand awareness (57%)

• Total sales revenue generated by marketing activities (55%)

• Changes in purchase intention (55%)

• Changes in attitudes toward the brand (51%)

• Changes in market share (49%)

• Number of leads generated (40%)

• Ratio of advertising costs to sales revenue (34%)

• Cost per lead generated (34%)

• Reach/frequency achieved (30%)

• Gross rating points delivered (25%)

• Cost per sale generated (23%)

• Post buy analysis comparing media plan to actual media delivery (21%)

• Changes in the financial value of brand equity (19%)

• Increase in customer lifetime value (17%)

• Other (4%)

• None of the above (2%)

Summarized Bob Liodice, ANA president/ceo: "Although armed with technology, analytics and data, marketers are nevertheless finding it difficult to measure their return on marketing investment in a standardized way.

"There's no consistency. This is why we felt it was important to have a conference that brings together thought leaders in a forum where they can discuss best practices, the tools are they using and the impact their work is having on the organizations."

Data sourced from: Association of National Advertisers (USA); additional content by WARC staff