Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability

Marketing ROI: The Path to Campaign, Customer, and Corporate Profitability James D. Lenskold McGraw-Hill New York, NY 2003 ISBN 0 07 141363 4

Keywords Marketing management, Return on investment, Profit maximization

Review DOI 10.1108/03090560410560263

Both marketing practitioners and researchers need a valid measurement of return on marketing investments. Marketing has traditionally been considered an expense and the contribution of marketing to the bottom line is less obvious than that of manufacturing and R&D. This book provides a timely straightforward formula for marketing ROI: it builds a comprehensive view encompassing fundamental principles to advanced strategic applications. The book is divided into three sections:

(1) "Understanding ROI Principles" (5 chapters), which builds the basic ideas of marketing ROI and establishes its importance;

(2) "Building the ROI Formula" (3 chapters), which covers issues related to both the return and the investment sides of the ROI formula; and

(3) "Applying Marketing ROI" (8 chapters), which discusses the applications at the campaign, customer, and corporate levels.

The first section, beginning in chapter one, depicts ROI as one of the few marketing measurements that can compare and measure diverse marketing efforts with consistency. Adopting marketing ROI provides a coherent "language" of profitability expectations and evaluation. The author argues that marketing ROI is the ultimate, unique, primary and most beneficial measurement, and that all alternatives suffer from incompleteness.

The basic principal ideas underpinning the ROI concept are presented in chapter 2: terms explained include net present value, gross margin, discount rate, incremental customer value and customer lifetime value. ROI threshold and hurdle rates are also discussed, since ideally marketing ROI measures incremental return generated by incremental marketing investment.

Chapter 3 explains how marketing ROI is different from common financial ROI measurements. In particular, marketing investment prioritization and selection differ due to the frequency of investments, the relatively small increments, and the need to be...