Marketing’s Fifth “P”
The Four Pillars of Profit-Driven Marketing by Leslie Moeller and Edward Landry
The lack of focus on ROI within the discipline of marketing is the core theme of The Four Pillars of Profit-Driven Marketing. The authors note that marketing professionals do not pay enough attention to hard metrics to guide their work and investments.
Moeller and Landry point out that although most marketers focus on the classic four “P’s” (product, price, placement, and promotion), they often forget about the primary driver of business growth: profit. They link this practice to the often negative return on marketing investment, giving examples in the consumer goods and automotive industries. The authors strive for “…profitable growth that delivers returns to shareholders.”
Marketing ROI is “a combination of modern measurement technologies and contemporary organizational design that enables companies to understand, quantify, and optimize their marketing spending and thus forge better connections with customers.”
They cite several dismal statistics, for instance: 68% of marketers are unable to determine the profitability of many common marketing activities and 30% to 50% cannot “place an accurate figure on the aggregate advertising and promotion for their business.”
The authors define ROI as ((profit earned on each unit sold * incremental volume) – total spend) / total spend and acknowledge that although ROI is not the only or perfect metric for all business contexts, it is tied to profitability and customer value, which are typically valuable insights into business performance. The note that “if profitability of marketing is rising, something good is happening.”
They identify several barriers to adoption of ROI within marketing organizations including access to data, business process and operational support, and ability to draw conclusions from the data. The highlight the “commitment to measurement” as a key organizational principle that will aid in implementation of an ROI measurement program.
Resolving these barriers involves bringing together financial data (profit earned on each unit sold) and consumer data (incremental volume) within an environment which supports analytics, decision support processes, and has organizational alignment around measuring ROI. These are the four pillars of profit-driven marketing.
The authors are proponents of an analytic approach to marketing and identify three categories of analytic approaches: behavioral, attitudinal, and business case.