• by Doug Brooks , June 14, 2007

A funny thing happened on the road to marketing accountability. Marketers have gotten bit by the accountability bug to such an extent that many can't see beyond the numbers.

Short-term ROI numbers, however, don't tell the entire story, leading some marketers up a blind alley into what we call the "ROI trap" - the relentless pursuit of short-term gains over long-term equity. The rub: Tactics with a high ROI-while perhaps financially expedient-may do nothing more than provide a short-term lift in sales. Meanwhile, some tactics with a mediocre short-term ROI are crucial to maintaining brand equity (long-term ROI).

Take, for example, a retailer who conducts a study that shows that circulars provide a higher short-term ROI than other mass media. This may be true, but only for a short-term bump in sales. The penalty for receiving this quick fix may be that you are training customers to "buy on deal" or "cherry pick." All that result are an erosion of the brand and an inevitable downward spiral.

Far better for retailers to think long-term.

In our experience, the long-term (three years) effect of advertising, provided it's well-conceived, typically is two times that of the short-term. For example: if you get a $1 return on TV in the short-term, you will get $2 in the long-term. Walk through your local food store and look at some of the major brands. Why are these brands top of mind? Why is it that you remember them from your childhood?

Clearly, there is value to brand building. The culmination of years of advertising (and I mean good advertising) have made these brands part of the fabric of our lives. Their years of investment have created a windfall of brand equity (long-term ROI).

There's a moral to this story: Quick gratification is a poor substitute for longevity.

Sure, ROI metrics and accountability are essential guides. They keep us from wasting precious marketing dollars by improving the productivity of these investments. Yet if we mindlessly run strategy "by the metrics," we can do real harm. In short, marketers and business decision makers must carefully balance the marketing mix to drive both short-term ROI and long-term ROI (brand equity).

So how are we supposed to use ROI effectively?

• Balance short-term ROI with long term brand equity. And by short-term, we mean within a year and by long-term we mean three years out. A marketing plan requires striking a healthy balance between tactics that yield a high short-term ROI, and those that are essential to driving sales in the long term.
• No long-term gains without short-term. If your advertising doesn't work in the short-term it won't have a long-term impact. Bad advertising fails at the starting gate. But good advertising carries over into the future.
• Understand your audience. Don't put the cart before the horse. Researching how you spend your dollars is effective only after you know whom you should be talking to and what you should be communicating.

Douglas Brooks is VP/product marketing atMarketing Management Analytics. He joined MMA in 2004 as part of its initiative in continuous marketing planning. MMA works with clients to develop fact-driven marketing strategies, comprehensive brand plans, on-demand marketing effectiveness, and comprehensive analysis of brand plan execution results. Doug can be reached at douglas.brooks@mma.com, or visit the company's web site at www.mma.com.