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Return on investment is missing in action

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Return on investment is missing in action


The marketing team spent its budget dollars wisely. But management can’t see the results.

When business spends money on anything, it expects to see a “return on investment”— a lift that has some correlation with the spend. This would be fine if marketing was a machine, with fixed, measurable inputs and outputs. Except we are living in “the Information Age”, so Industrial Age accounting will fail to notice what is really going on.

Marketing often appears as a cost sink on the balance sheet. It’s relationship to output is not always obvious. Kathleen Schaub, marketing management and organization strategist, and Mark Stouse, chairman of Proof Data Corporation, want to shed some light on this situation. Schaub focuses on how complexity affects marketing, while Stouse takes a deeper look at analytics. These two angles converge on a common point: the old way of measuring marketing ROI misses a lot, providing inaccurate guidance for marketing efforts.

Schaub goes into further detail in her paper “Marketing Is Not a Vending Machine.”  “Markets are what science calls complex adaptive systems. The interactions of many independent agents, both individuals and enterprises – customers, companies, influencers, partners, and governments, produce feedback loops that cause situations to constantly change. Change produces many unknowns.” Schaub wrote.

Those feedback loops have speeded up, thanks to globalization and digitalization. “There’s no breathing room,” Schaub told us, so marketers have a hard time keeping up. It is only in the past several decades that data and computers have finally provided a way to see this happening. “Now that things have speeded up, we can see these patterns in the data.”

“ROI for marketing is not there.” Schaub said. “Never has been. Never will be. Not in the old standard sense.” 

The only thing certain is uncertainty

“The big shift, which is probably permanent, started with COVID,” Stouse said. “The feedback loops really matter,” Stouse continued. Now you needed to have a value goal, a route to value, and the ability to track your effort, much like a GPS, he said. This is running concurrently with the disintegration of third-party data.

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To get a more realistic picture, some marketers are returning to an older technique: marketing mix modeling (MMM). This technique is more common among larger Fortune 500 companies, Stouse said. But it was too balky to make operational — too slow, too manual, too expensive, too hard to scale, and hard for people to understand.

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Today, MMM is getting a second look. “Automation has eliminated many of these challenges to operationalizing analytics.” Stouse said. “MMM is rooted in multi-variable regression analytics, which is the fundamental underpinning of the scientific method.” And this is mainstream and well understood, he added.

Any change in analytics will also trigger a change in organization. “You cannot continue to have the same kind of rigid, command and control, hierarchical, siloed kind of organization and have these very rigid waterfall business processes. They are just too slow, too inhuman, they are barren of information, because information cannot flow to where it is needed,” Schaub said.

“I kept asking CMOs and CEOS, ‘can you do ROI yet?’” Schaub recalled. “The answer was always ‘no’”. They had workarounds, like attribution, and pushing marketing “down funnel” to help sales, “but at the end of the day, people have to give up the fantasy that it [marketing] can ever be completely predictable.” Schaub said.

People believe in cause-and-effect, that with enough data, the right strategy, the right work processes, or enough efficiency, they could figure things out, Schaub said. COVID crashed that belief system. To rebuild, analytics will help, but organizations will also have to re-align so that they can work better “in conditions that need our response as opposed to our ability to predict.” she said.

If you can’t predict, project

Businesses can still draft scenarios and craft projections, laying down an outline of how things are expected to happen. “Then you have to ‘fast follow’ as the future becomes the present, with latent, low-level re-calculation, so you can find out where you are relative to that projection.” Stouse explained.

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Here Stouse compared marketing analytics with GPS. The destination is not a fixed ROI point reached by a certain date. Instead, the goal can be reached despite changes in traffic and necessary detours. Just as the GPS recalculates, the decisionmaker can also recalculate the market spend or rescale the project to better accommodate reality.

Like GPS, you need a driver who can make decisions and change course as needed. Here the marketer is at the wheel, advised by analytics, able to react to circumstances, seize opportunity, or reduce risks as needed, Schaub explained. This is need not be a single person, but will often be an agile, multi-disciplinary team which is quicker, smarter, more innovative, and which can foster human problem solving. “You build for the long term, but the only time you can act is now,” Schaub said.

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Learning to live with speed

The speed of data, and feedback loops has increased tremendously, changing the digital landscape more quickly than a company’s capacity to comprehend and keep up.

Here the concept of the OODA Loop — Observe, Orient, Decide, Act — becomes relevant. The concept was coined by fighter pilot Col. John Boyd, who proved that if you can do this faster than your competitor, he will be stuck reacting to your last action as you execute your next move. “This is increasingly where business is and increasingly where marketing is,” Stouse said. “You have all these variables, and these variables are moving at a speed that the unaided human brain can’t track.”

“Being able to use software…compresses the OODA loop.” Stouse gave a real life example where his firm is working with a technology company. “This is a huge B2B enterprise tech company. It’s a long cycle business who has used MMM for six or seven years in a very traditional, conventional way.” he said. “[B]y the time the analytics reaches the marketing people, it’s so out of date that the prediction no longer matters…They don’t need to change the math. They need to change the speed at which it is all computed.”

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Read next: More about leveraging the OODA Loop

As Schaub noted in her paper, a marketing department may have to track up to 30 variables to provide the insight needed to understand what present conditions are like. But it may not take as long as one might expect to pull them all together. Data automation can shorten the time it takes to weave insights from data streams.

“I don’t mean to imply that any of this is easy,” Stouse continued. “But it has significantly improved.” One can use tool sets like Supermetrics  or Datorama (both Proof partners) to gather data streams, sanitize, cleanse and harmonize them, and then pipe the data into platforms like Proof or Tableau.

“We can go into a customer that has data but doesn’t have any analytical history at all…and the first 10 models can be up and running in less than 60 days.” Stouse said. Go to a traditional consultant doing MMM, and “it would be 10 to 12 months before you saw your first model.”

In the second part of this two part article learn why predictability and control are out, while perception and reaction are in.

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About The Author

William Terdoslavich is a freelance writer with a long background covering information technology. Prior to writing for Martech, he also covered digital marketing for DMN. A seasoned generalist, William covered employment in the IT industry for Insights.Dice.com, big data for Information Week, and software-as-a-service for SaaSintheEnterprise.com. He also worked as a features editor for Mobile Computing and Communication, as well as feature section editor for CRN, where he had to deal with 20 to 30 different tech topics over the course of an editorial year. Ironically, it is the human factor that draws William into writing about technology. No matter how much people try to organize and control information, it never quite works out the way they want to.



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MARKETING

Old Navy to drop NFTs in July 4th promo update

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Old Navy to drop NFTs in July 4th promo update

Old Navy will update its yearly Fourth of July promotions by saluting the metaverse with an NFT drop, going live June 29.

In honor of the year they were founded, the retailer will release 1,994 common NFTs, each selling for $0.94. The NFTs will feature the iconic Magic the Dog and t include a promo code for customers to claim an Old Navy t-shirt at Old Navy locations or online.

“This launch is Old Navy’s first activation in web3 or with NFTs,” an Old Navy spokesperson told MarTech. “As a brand rooted in democratization and inclusivity, it was essential that we provide access and education for all with the launch of our first NFT collection. We want all our customers, whether they have experience with web3, to be able to learn and participate in this activation.”

Accessible and user-friendly. Any customer can participate by visiting a page off of Old Navy’s home site, where they’ll find step-by-step instructions.

There will also be an auction for a unique one-of-one NFT. All proceeds for the NFT and shirt sales go to Old Navy’s longtime charitable partner, Boys & Girls Clubs of America.

Additionally, 10% of NFT resales on the secondary market will also go to Boys & Girls Clubs.

Support. This activation is supported by Sweet, who’s played a major role in campaigns for other early NFT adopters like Burger King.

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The Old Navy NFTs will be minted on the Tezos blockchain, known for its low carbon footprint.

“This is Old Navy’s first time playing in the web3 space, and we are using the launch of our first NFT collection to test and learn,” said Old Navy’s spokesperson. “We’re excited to enable our customers with a new way to engage with our iconic brand and hero offerings and look forward to exploring additional consumer activations in web3 in the future.”

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Read next: 4 key strategies for NFT brand launches

Why we care. Macy’s also announced an NFT promotion timed to their fireworks show. This one will award one of 10,000 NFTs to those who join their Discord server.

Old Navy, in contrast, is keeping customers closer to their owned channels, and not funneling customers to Discord. Old Navy consumers who don’t have an NFT wallet can sign up through Sweet to purchase and bid on NFTs.

While Macy’s has done previous web3 promotions, this is Old Navy’s first. They’ve aligned a charity partner, brand tradition and concern for the environment with a solid first crack at crypto.


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About The Author

Chris Wood draws on over 15 years of reporting experience as a B2B editor and journalist. At DMN, he served as associate editor, offering original analysis on the evolving marketing tech landscape. He has interviewed leaders in tech and policy, from Canva CEO Melanie Perkins, to former Cisco CEO John Chambers, and Vivek Kundra, appointed by Barack Obama as the country’s first federal CIO. He is especially interested in how new technologies, including voice and blockchain, are disrupting the marketing world as we know it. In 2019, he moderated a panel on “innovation theater” at Fintech Inn, in Vilnius. In addition to his marketing-focused reporting in industry trades like Robotics Trends, Modern Brewery Age and AdNation News, Wood has also written for KIRKUS, and contributes fiction, criticism and poetry to several leading book blogs. He studied English at Fairfield University, and was born in Springfield, Massachusetts. He lives in New York.

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