I'm glad to have Paul Flugel here with me. He is the Vice President at Catalina Marketing. And we're going to talk to him about marketing ROI, marketing return on investment. Thanks for being here, Paul. >> Thanks for having me. >> So Paul, let's talk about measuring marketing return on investment. How prevalent is the measurement of marketing return on investment these days? Is the trend growing, declining, what's going on? It's very prevalent. I'd say that's an understatement. I've spoken to many research people at many companies. And I actually did kind of a survey and asked, what's the leading metric they used while doing the marketing and almost universally the answer was ROI. We have many clients that use it. I'd say greater than 90% try to calculate some form of ROI or another. There's one major global CPG company that is evolving more and more. They actually created a corporate center of excellence to define the appropriate standards for ROI and methodologies that are going to be used to calculate it. So, it's very prevalent and the trend is toward calculating it even more. >> What's driving the growing interest behind measuring marketing return on investment, do you think? >> I'll tell you, one of the main trends that's driving this growing interest in marketing ROI is just marketing being treated more and more like other investments by companies. You know, the finance department of companies care about all of their investments, and more and more marketing is not getting a pass. They compute their ROI for their investments, and plan in capital investments. And more and more, they want to compute their ROI for their marketing investments. In the CPG industry specifically, another trend is that top-line growth has stagnated, and it's stagnated for quite a few years, now. So, it used to be that they could count on, maybe, not enormous growth, but a steady top-line growth over the years. And it would help grow the bottom line, but that's not there anymore. So, they've got to look with even more scrutiny at every dollar you spend to try to grow the bottom line. And that's where some of the increased scrutiny of marketing investment has come. >> So, from what I hear, you're saying that the pressure in terms of competition and the slowing economic growth has pushed a lot of this interest into measuring every dollar we spend on marketing. Now if we think about measuring return on investment, what's special and what's challenging about measuring return on investment for marketing? >> Right, the fundamental challenge is just the way the world has evolved around us. Just the marketing world and the media world specifically. So, if we compare measuring and evaluating marketing today versus 20 years ago, even 10 years ago, the number of consumer touch points is exploding. An all digital world is new and emerging. And so, that's one of the biggest challenges. Back in the nineties or eighties, people often a brand had to figure out how much television advertising was contributing, for instance, newspaper couponing versus in-store promotion, and that might be it. And now, there's an explosion of things people have to evaluate. So that's one of the challenges. The second challenge is kind of comes on the heels of that, is collecting and integrating all the necessary data to evaluate what's going on. So, first of all, the fact that there's the sheer number of things going on is one challenge. But the other is, how do you collect appropriate and accurate data to describe the execution of all of these things and then integrating it all together in a way that is accessible to analyze? So, that's the second challenge, the data integration. The third challenge is then, even if you can get all that data integrated, and it's accurate, it's a big analytic challenge to evaluate it, and to separate out the impact of one marketing element from another. Typically technologies are used like regression analysis and marketing mix modelling. Sometimes test versus control analysis is used. Test versus control is very accurate if you've got the data It's very accurate for analyzing one element at a time. But the challenge is if you want to analyze all these things you're doing together. That's why people like to use a marketing mix analysis. But then when you're doing that, other challenges arise, like making sure that it's appropriately allocating the credit. Statistical challenges like multicollinearity of course come into play. Finally, if there are technologies like multi touch attribution modeling that have become very popular in the digital world, and they can be very effective for products and brands that kind of live in the digital world. They follow the marketing executes in the digital world, and you make your sales online. So, if the sales and the marketing all exist online, then the data is more amenable to being analyzed with multi-touch attribution. But challenges come in when you've got products where most of their sales are offline, some of their marketing is offline, but a lot of their marketing is online. And that's where it gets really, really challenging.
