The pressure continues to grow for each phase of an organization’s operations to demonstrate how it contributes to the bottom line financials, and perhaps even in quantitative terms such as ROI. Marketing has often gotten something of a pass on this, since the ROI of advertising or event sponsorship can be very hard to measure. The payback for marketing research is also not measured very easily, although managers often feel pressured to improve the ROI of their research expenditures.
Marketing research is often viewed as an expense that reduces brand profitability, a necessary evil among marketing activities. In many companies (I particularly see this at the foreign offices of international companies) many brand managers think of marketing research as a required activity rather than a value-adding activity, and as a result research is often done perfunctorily, poorly, and ultimately viewed as a waste of money.
But it shouldn’t be that way. Money spent on marketing research should be seen as an investment in making better decisions. The return on this investment realized when the results of the research are used to avoid mistakes or to optimize choices among marketing activities. No clear decision? No research is justified. Marketing research expenditures should be considered investments in risk-reduction. When seen this way the return on marketing research can be increased and much better managed.
Let me propose a five step approach to improving your organization’s return on marketing research expenditures, although keep in mind the precise ROI might be difficult to quantify.
- The first step is to always have a clear objective – and the objective should always be to improve decision-making. Marketing research is too expensive and such a limited resource that it must be portioned out carefully, therefore decisions with little risk or downside potential shouldn’t be researched. Only the big risky decisions need marketing research to help the decision makers see the consequences of various choices and to help determine the best course of action.
- The second step is to specify exactly what the decision is (or the decisions are), which isn’t always clear. The decision maker and the marketing researcher (who should properly be acting as a consultant at this point) might have to deliberate until they can clarify exactly what has been decided, what is not part of the decision, and the risky decision on the table. Decisions can be obvious (go-no go decisions, such as price change) and less clear-cut (there is usually a standing commitment to fix problems highlighted in tracking studies).
Check in next week to see the final three steps in improving your organization’s marketing research expenditures.— Tony Zahorik