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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.

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.

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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.

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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.

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All of the companies scored relatively high in at least one area, and relatively low in another. The one company that seemed to do best across the board was Patagonia, the outdoor gear merchant. Of course, because Patagonia is privately held we don’t really know how profitable it is. We also don’t know how efficiently the company spends its marketing dollars (although it has been praised in the trade press for its apparently enviable integration of catalog, Internet and retail sales).

We do know that company founder and CEO Yvon Chouinard has his own —
and very unconventional — ideas when it comes to financial management
issues: “… I consider the bottom line the amount of good that a
business has accomplished over one year,” he says, adding: “At Patagonia,
profit is not the goal, because, as the Zen master would say, profits
happen when ‘you do everything else right.'”

Doing things right at Patagonia just might be the inverse of the Marlboro model. Actually, there is one similarity between the two brands — both make products that are perfectly legal as well as potentially lethal. Patagonia got its start making tools for mountain climbers, and as Chouinard says: “If
a tool failed, it could kill someone, and since we were our own best
customers, there was a good chance it could be us!”

His very astute observation certainly puts the concept of “accountability” in marketing in a dramatic light. It also underscores a key point about his brand of accountability, which is that it starts from within. Yvon Chouinard doesn’t just make gear for outdoor activities; he’s an outdoorsman himself. That simple fact seems to inform just about everything he does as a businessman and a marketer.

His first product was a reusable piton (the metal spikes hammered into rocks to secure ropes for mountain climbing). Before Chouinard came along, pitons were left behind; he thought that was not only wasteful but also not great for the
environment. Patagonia also has a well-developed sense of style (starting with
the romantic name of the brand itself) and a commitment to innovation
(including a parka made of recycled plastic Coke bottles, for example).

As for leadership, Chouinard may not be the best-known name in
business, but he’s out with a new book, an autobiography titled Let
My People Go Surfing.
The title refers to a company policy that
says if the surf’s up, employees should feel free to head for the beach if
they want to. Obviously, Chouinard trusts his employees to be as
accountable to him as he is to them. That attitude certainly projects
leadership.

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But whether the way Chouinard treats his employees (or any
other aspect of his business model) has application to other companies
certainly is open to debate. Would it work for McDonald’s? For Ford
Motor Company? For Marlboro?For your enterprise?

Where do
we go with all of this? To be honest, we’re not quite sure. Shelley,
Robert, Peter, Rick, and I plan to order in some more food and keep
thinking about it. If you have some ideas to share, please email us at
accountability@reveries.com.

Of this much we are certain: The true meaning of accountability in marketing is something more than what the great mainstream of marketing would have us believe it is.