Measuring Marketing: Beyond ROI

This may shock you, but if the relationship between media spending and profitable sales volume is the measure, Marlboro cigarettes may be the most accountable brand in marketing today.

As reported recently in BusinessWeek, Marlboro "now owns more than 40% of the market, up more than 2.5 percentage points in as many years." According to Merrill Lynch analyst Christine Farkas, operating profits for Philip Morris (Marlboro's parent) will "reach 28% next year, from 26% in 2004, as net income grows to an estimated $11.4 billion on $66.3 billion in sales in the U.S. and abroad. That's twice the current operating margin of well-run companies like General Electric and Exxon-Mobil and also well beyond Procter & Gamble's 19% margin this year."

Now, we don't know exactly how much money Marlboro spends on its marketing, but Philip Morris acknowledges that it spends less and less on marketing each year. That's because the government won't allow cigarette companies to use mass media to promote their products, which forced Marlboro to innovate and also build a really big database of 26 million of its most loyal customers.

Not only does that approach cost Marlboro a heck of a lot less than mass media advertising, it also builds a kind of loyalty that television, radio and print just can't buy. The brand is able to lavish attention on its fan base -- up to and including "special trips to a ranch it owns in Montana, where vacationers are showered with gifts, eat five-course meals, drink for free and enjoy massages, snowmobiling, horseback riding and the like, all on the company tab."

In other words, Marlboro's customers get to live in Marlboro country, versus just watch it in 30-second increments on television. Which, when you think about it, is a form of accountability to its consumers in itself.

But that's not the point here. The point is that Marlboro is blowing away the field in terms of the ROI on its marketing expenditures, which should make it the most admired marketer in the world today. After all, to read the trade press and to attend industry conferences, "accountability" in marketing is all about quantifying and justifying the money you spend on media, events, and so forth.

Well, if Marlboro is a marketing hero, then something clearly is amiss. At best, it would seem that too many marketers are adopting too narrow a definition of accountability. At worst, it would seem that they are missing the true driver -- or drivers -- of accountability in marketing.

What are those drivers? I asked my friends, Shelley and Robert Forrester of the Forrester Network, because Shelley and Robert are in the business of helping companies find that which truly drives growth in their businesses. "Great question!" they said. We agreed to order in lunch and talk about it.

We also asked my "Cool News" colleagues, Peter F. Eder and Rick Leonard, to join the discussion. It was Peter who came up with what might be a more tenable foundation on which to determine the true meaning of accountability in marketing:

• Financial Management (in terms of both media spending as well as profitability);
• Design (for products or services; from innovative to copycat to archaic);
• Customer Service (from exquisite to irritating);
• Social Responsibility (from caring to corrupt);
• and Leadership (both internally and externally; from stand-up to hunkered down).

Our platform may not be totally rock-solid but our premise is pretty firm: Achieving true accountability in marketing is a complex, multi-dimensional discipline. It's not a simple matter of figuring out what you're getting for what you're spending on marketing.

However, these many subsets of accountability, we think, roll up into one overarching kind of accountability. That, of course, would be accountability to one's consumer. Sure, that's obvious, but in fact it's a point that seems largely lost amid the current fixation on media spending as the wheelhouse of accountability in marketing.

Not knowing whether we had landed on the moon or simply orbited the conference room, Shelley, Robert, Peter, Rick and I agreed to try to put our premise to the test. Each of us picked a company we admired to analyze against these five measures of accountability -- financial management, design, customer service, social responsibility, and leadership.

Of the five companies we scanned (Patagonia, JetBlue, Apple, Target, and Johnson & Johnson), Patagonia scored highest and J&J the lowest, with the others somewhere in between. Granted, our judgments were subjective, unscientific, and far from comprehensive. In addition, it certainly is not fair to apply essentially the same standards to companies in different categories and in different stages of development. But we think we produced some thought-provoking insights all the same.