The goal of this paper is to use three condensed case studies to present an analytical ROI framework that helps marketers make sense of complex and seemingly chaotic marketing investment patterns and allows them to quickly reach conclusions about future marketing commitments.
The article focuses on three marketing science techniques with roots in econometric analysis. The three techniques are: structural equation modeling, historical analyses, and in‐market experiments.
The case studies give evidence of hard returns not only in terms of marketing funds conserved but also in terms of revenue gains, more positive brand equity, and greater marketing efficiency. The article suggests that changes in marketing practices to include the new ROI techniques will yield measurable benefits.
The article will be of value to marketing leaders, brand managers, and senior executives who seek quantifiable returns from their marketing functions. The three quantitative techniques described make sense of previously inscrutable marketing choices such as spending more on word‐of‐mouth campaigns than on national advertising or selecting one direct‐mail approach over another.
To date, marketing ROI work has been constrained by confusion over ROI definitions, by decisions about what data to collect, and by an emphasis on pricing, coupons, and promotions rather than broader marketing questions about, say, the efficacy of direct mail or the impact of regional advertising. The article reports on a fresh approach termed marketing science – techniques whose fact‐based analyses make it easier for managers to decide where to invest.
