This is part of an occasional series by the principals of Sensei Marketing on the issue of Marketing Management.
Too often marketers are required to make decisions for which the right answer is “it depends.” Factors such as the business environment, the political environment, past sales performance or even internal politics can influence our decision making. Further, marketers are sometimes measured on results after the fact, using different criteria than those used to make the decision in the first place.
Consider this case:
As a marketing manager, you have a choice between running two programs. You cannot afford both, so you must pick one.
Program A, designed to generate sales leads, has a return on investment (ROI) of five times.
Program B, focused on brand-building, has an ROI of 15 times – meaning the expected revenue generated is 15 times the cost of the program.
Simple, really; 15 times is better than five times, right?
What if Program A has a short lifespan? The cost is accrued to this financial period but so is the revenue generated. Quick hit, marketers like quick hits.
Program B has a longer shelf life. Here, the cost is incurred during the current financial period; the ROI from the effort is earned in this period PLUS the next two periods, and possibly beyond. Additionally, for Program B, the return is not uniform; the return this period isn’t quite up to the cost, but the next periods are all gravy.
In the scenario painted above, mathematically, Program B, with a 15 times return, is better. However, the choice isn’t as clear cut as that.
Too often the pressure to generate results now overrides our decision making. It may cause us to choose the option that isn’t in the best interest of the business in the long term.
How do you decide? Join the debate.
Other posts in this series:
When does good management become a hostage to political correctness?