Marketing Return on Investment
Posted by Chris Quinn
Dr. Roger Best is a leader in the marketing field with a particular focus on establishing marketing profitability measures that have an established relationship with profitability. In a series of guest posts, he will outline some basic concepts illustrated by examples that will be provided for your consideration.
Apple, Inc produced a marketing profit (Net Marketing Contribution) of $10 billion in 2009. This was achieved through a $3.1 billion investment in marketing and sales. As shown above, the marketing profit (output) divided by the investment in marketing and sales (input) times 100 percent resulted in a Marketing ROI of 323 percent. What constitutes an outstanding Marketing ROI?
The graphic above represents a broad sample of well-known Fortune 500 companies. The average Marketing ROI for this sample is roughly 200 percent. Clearly, Apple's Marketing ROI of 323 percent is considerably higher than the average. More importantly, the higher a company's Marketing ROI, the higher the Pre-Tax Return on Assets (ROA). As shown, Apple's Pre-Tax Return on Assets was 14.2 percent in 2009.
Apple Pre-Tax Return on Assets - 2009
Pre-Tax ROA = Operating Income / Total Assets x 100%
= $7.7 billion / $53.9 billion x 100%
= 14.2%
While the correlation is far from perfect, there is reason to believe that companies with higher Marketing ROI's are more profitable. This measure of Marketing ROI is simple to compute and can be used for a business unit, region, market, product line or product. We can compare different areas of a business, utilizing this measure of Marketing ROI. The Marketing ROIs for Mac, iPod, iPhone, iTunes, and all other Apple products and services combined to produce the Marketing ROI of 323% in 2009.
Dr. Best is a well known author and consultant to many top corporations. His book Market-Based Management is used on top MBA programs and many Fortune 500 companies. To support this book and the Marketing Metrics Handbook, Dr. Best has begun to write a series of Blogs on Marketing Metrics.
He is an alliance partner of Imprint Learning Solutions in the introduction of the Managing Profitable Growth 'team based applied learning' workshop series that link marketing decisions to the profitability of the organization.
Click Here to learn how teams are uncovering millons in new marketing profit opportunities!