Is There a Better Holistic Approach to Justifying Marketing Spend?
In a roundtable I led during Shop.org’s Annual Summit 2009 in late September in Las Vegas, called “Building and Justifying Your eCommerce Marketing Budget & ROI,” my plan was to moderate the group and give marketing expenditure industry averages for online spending. But the retailers were more interested in expressing their frustrations around channel conflict. Why have marketing departments and budgets become so siloed?
The industry average for total marketing expenditure ranges between 9 percent to 20 percent. The big variant is attributed to the different needs of pure-play vs. multichannel retailers. The justification and return on investment for sustaining this budget isn't that clear. Today, each department is forced to determine and defend an ROI based solely on its marketing medium.
This seems to support the unlikely hypothesis that each marketing medium doesn't reflect upon and impact any other. The unfortunate result of that thinking is that marketing departments are now trained to become more territorial — each department protecting its marketing medium and budget. What would be more effective is to understand what marketing program, either online or more traditional, drives response or revenue.
Unfortunately, businesses are absolute when relying on these numbers. A retailer sitting at my table spent less than 1 percent on her marketing budget for her online division. The brand/company had been built around another medium and, therefore, she was only allowed to account for revenue that came through the online channel that was attributed to a specific online marketing program and, even then, only if the customer was a “new customer.”
She wasn't allowed to account for direct sales of a repeat customer. As a cataloger for many years, I had to continually prove the worthiness of the mail piece after e-commerce emerged, as if all sales being driven online had nothing to do with the million catalogs in the mail. We know that a business whose housefile was built via mail wouldn't be able to survive without some sort of printed piece landing in customers’ mailboxes. The question is how many and how does a marketing department completely justify it.
Retailers' ultimate goal, like that of any other business, is to make money. They need to sustain some type of brand awareness through advertising and marketing, and distinguish themselves from their competitors — by price, service, technology, assortment or any combination of those.
A mixture of brick-and-mortar, online and catalog is the foundation for most retail businesses. Retailers should be looking at their businesses more holistically. How should budget and capital expense be allocated? How does each department’s marketing strategy impact the others'? What works best for the company overall?
Studying circulation mix, building or closing physical locations, investing more money into e-commerce technology, testing new online and traditional programs, these should all be decisions being made at the strategic level — with all parties at the table. This will give marketers and businesses a clearer road map of how to sustain and grow for the future.