In marketing, there are always going to be hot takes; but very rarely do you get a hold of anything truly spicy. The very notion that ROI may actually be a misleading and limiting concept, raises many hackles and temperatures.
However, with a more informed, nuanced, and statistical approach to ROI and marketing data analytics, marketers can begin to separate the truths from the lies to begin to build more effective strategies and campaigns.
On episode #3 of What Gets Measured, a NinjaCat original podcast, we speak with Andrew Wilshire about ROI, lies, and marketing data analytics.
Andrew Willshire is an independent analytics consultant out of the UK, and founder of Diametrical Limited, where he advises a distinguished and expanding rap sheet of clients that include Dentsu Aegis and Bang & Olufsen. He’s been a developer, a data analytics director, he’s packing degrees in engineering, math and music, and today he brings his full suite of skills to the NinjaCat podcast.
Most marketers agree that there has been a ton of data generated by the proliferation of social media, digital advertising, and e-commerce platforms. And even more marketers would agree that all that data requires interpretation and context.
“Any ‘one-number’ solution is doomed to fail,” says Andrew. “Data is a tool, not the boss.”
This is why learning that ROI, one of the most widely accepted metrics used in marketing, can be potentially misleading and strategically limiting, is a little off-putting at first. But then the math hits.
“ROI places a cost-mindset on marketers, viewing marketing as a passive investment, as it might be seen by a bank,” explains Andrew. “However, you can’t take an ROI of six to the bank, because ratios are no good in reality.”
“The law of diminishing returns says that there is a maximal amount of value you can extract from an endeavor. If you subtract the cost of doing that activity, there is another curve. The curve of ROI starts at infinity if you spend nothing, and slides down very fast after that.”
Andrew goes on to explain how ROI might limit sustainable demand, and negatively impact two other important functions of business, marketing and innovation.
“What was the ROI for Sony when they released the Walkman, or Apple when they released the iPod?” asks Andrew.
Other topics covered in the interview;
- The role of ‘observability’ and domain knowledge in data science
- The truth about how often a marketing mix model should be updated
- How Andrew helped a global shampoo brand in Malaysia discover deep insights in simple market research
- …and MORE!!
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Here is a round-up of links mentioned during the episode:
Andrew Willshire, Author at Marketing Week