A Pean To Incremental Profit

Adliterate’s Richard Huntington sees a difference between accountability and effectiveness. I’m not sure I do, but let’s go with his vision for a moment:

…the standard measure for return on investment would appear to be the difference between the cost of the campaign and the cost of reaching the same number of people in more conventional media. That is not a return on investment, that is the sort of haphazard disregard for accurate accounting that precipitated the current global financial crisis.
Indeed, any effectiveness metric that does not tell you the incremental profit that your marketing activity generated for the business isn’t worth the paper it is written on. Not click through, not cost per impression, not cost per response, not page views, not dwell time, not fanciful measures of engagement. Incremental profit. And if that seems an extraordinarily difficult thing for most digital campaigns to demonstrate, I’m heartily sorry. But it doesn’t make it any less imperative the industry resolves this question, because it isn’t going away.

What is clear is Huntington doesn’t want to dwell in metrics. Here’s why:

…what Chief Executive is really the least bit interested in how responsibly any one has used their money? What they tend to be concerned with is whether their marketing is having an un-ambiguously positive effect on the growth and profitability of the business.

I’d say CEOs are interested in all of the above–how partners provide value, what it costs and what their firm is going to gain from the relationship.

About David Burn

I wrote my first ad for a political candidate when I was 17 years old. She won her race and I felt the seductive power of advertising for the first time. Today, I'm the founder and creative director at Bonehook in Portland, Oregon. We bring integrated marketing solutions to our clients in healthcare, human services, real estate, fashion, outdoor recreation, and food and beverage.

Comments

  1. Mr. Huntington’s productivity-based approach to marketing spend is not uncommon in pharma companies and, previously, auto manufacturers where R&D, production and distribution costs can dwarf marketing spend. At that point marketing ROI is calculated using a more comprehensive set of product costs.
    Unfortunately, Mr. Huntington’s thesis breaks down for advertisers in less capital-intensive markets where ad spend efficiency (between mediums, channels, formats even individual ads) is critical to overall profitability.

  2. Michael,
    Thanks for the clarity and additional insight.
    I’ll add your “killer” blog to our Blog Roll.