Wednesday, May 6, 2009

"Marketing" is not just an investment but insurance

Recently, I read an article by Al Ries, legendary marketing strategist. The article was reflecting on overemphasis on marketing metrics and ROI in this age of sophisticated data models used to analyze consumer behaviour. He goes on to say that business world suffers from "metrics madness" and so is marketing buried in ROI analysis. Now I found that intriguing...I spent a year in B-school learning to measure marketing ROI as it was the only way marketing would stay relevant.

Moreover, my engineering background has led to me believe that "if you cant measure something, you cant manage it". And so, as you'd guess, I found Al Ries' comments puzzling to say the least but the guy made his point.

Today, marketing is trying to create its value to business by measuring its impact (ROI, KPI customer metrics). However, marketing is more of an art than science. You dont need marketing ROI to prove that Apple's marketing efforts are more effective than Microsoft's. Question is can marketing metrics improve or optimize marketing spend - i think it can. But mathematical modeling is an overkill for marketing and is not going to help businesses. You just cant run a company by numbers alone - or you will run the company to ground. What is needed are marketers who are creative and strategic in their approach.

And if this whole buzz around marketing metrics and data crunching is to create relevance for Marketing in the business, then the whole premise is flawed.

In words of Al Ries: Advertising (read marketing) is more like insurance than it is like an investment. What's your "return on investment" of a five-year term life insurance policy if you don't die? Zero.

We dont buy insurance policy to make money but to protect our family in case we die. Similarly, marketing is an insurance to secure market share and even if ROI is negative, in few circumstances, it is worth every penny if you are defending your market leadership - consequences of losing which is not comprehended in your ROI analysis but could cost the business in the long term.

The overall practice of marketing is not mathematically based, although subsets of the discipline may be: direct marketing, research, media selection. Mathematics is logical. Marketing is not. That's why marketing is so difficult to learn.