Saturday, August 12, 2006

Declining Marketing Impact?

Over the last months a multitude of publications (e.g AdAge, Business Week) talked about the declining effectiveness of not just traditional broadcast marketing vehicles but marketing in general. But no one tries to dissect in any more details if marketing investments overall, independent of channel, create today less impact than before. Most articles focus on the efficiency decline of TV spots but expand the impact decline to other marketing vehicles, too

Looking at the growth of overall marketing spend in comparison to GDP, it does not seem that there is a big disconnect, since both numbers are rising steadily in roughly the same proportions. Therefore the marketing dollars invested per 100$ revenue generated across Fortune 2000 companies seem to remain consistent. Does this mean that we just need to reallocate marketing investments against different marketing channels, mainly away from traditional broadcast media to interactive and non-traditional vehicles?

Talking with leading marketers at Fortune 2000 firms I get the impression that the cost of acquiring and retaining customers continues to grow. If this is true, then we would need to see a significant increase in marketing dollars spend for generated revenue. But as mentioned above, we don’t see this pattern. Surprisingly for the size and the acclaimed sophistication of our marketing industry it is very difficult to get reliable data points to verify either my impression of consistent relation between marketing dollar and revenue impacted and generated or to support most marketer’s perception of increasing cost of acquisition and retention per customer.

Does anyone know about recent research about this challenging question beyond very channel specific analysis like the recent McKinsey study about the declining effectiveness but rising cost of TV spots? This is not a minor issue but goes to the fundamental issue of shifting investment strategies within a Fortune 2000 company (either away from marketing to services or product development or vice versa) and within the marketing budget itself (from one channel to another). There is almost too much focus on tactical channel optimization instead of asking the bigger question of marketing effectiveness overall. Thoughts?


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