The Rate of Return

by | Nov 15, 2015 | Marketing, Advertising, and PR

Marketing agencies are frequently confronted with questions regarding the rate of return (ROI) of our service. People are used to investing a set amount of funds on the stock market and receiving a clear cut ROI statement at the end of a specified period. There is either a positive (profit) or negative (loss) ROI depending on the performance of the stocks. An investment is either successful or it is not. Period.

This is not the case in marketing. Marketing involves a process; a process that potentially necessitates an extensive amount of time. This amount of time depends on the nature of the campaign. Advertising a holiday special can be done quickly and the success be measured relatively well. People either respond to the special offer, or they don’t. A sustainable marketing campaign aiming at creating long-term brand awareness and permanently increased profits is more complicated and hardly measurable in the short and medium-term.

Brand awareness takes place in people’s heads. It increases the likelihood of individuals choosing one product over another. This decision is not only based on the quality and price of the good or service, but depends especially on the overall perception an individual has about a company or organization. A sustainable marketing campaign will shape a whole bundle of feelings towards a company and establish the company as prime choice in people’s heads. This process takes time as people don’t change their consumption habits from one day to another. There is a reason you have a favorite desert.

Just because sales does not increase immediately after the start of your marketing campaign does not mean the campaign isn’t working. It is working on a subconscious level! Brand awareness must be built step by step. Just imagine convincing a person using all kinds of Apple products from using a Samsung Galaxy or vice versa. A well executed campaign can actually do this – as long as it delivers a consistent message over a certain period of time. The length of this time period depends on the good or service. People tend to be more faithful towards certain products/services (car make), but not at all towards others (cable providers).

This brings us back to the main topic: the rate of return. How can you measure developments happening in your subconscious? Does one person’s subconscious influence the purchasing behavior the same way another person’s subconscious does? And these are only internal developments. What about all of the external factors influencing an individual’s behavior? Having a degree in economics helps me to maneuver the fine line between humanistic disciplines and natural sciences. I am a social scientist, trained to analyze human behavior using mathematical models, especially regression analyses. Being able to mathematically predict human behavior is the holy grail of economists. You can certainly account for specific external influences like taxes, unemployment, technological developments, and family; yet, it is impossible to account for everything (!) happening around you.

These are the two reasons why marketing agencies cannot seriously promise a certain rate of return. Successful marketing takes time, and the gradual and mostly subconscious developments taking place in your mind can hardly be measured, especially if taking into account countless external factors. Patience is a virtue for a reason.

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