Making the Connection: ROI and Brand Value

It is an age old questions from management to marketers: What will my ROI be if I invest in this type of marketing? The answer to that question unfortunately isn’t always easy for every area of marketing.

Determining ROI on specific marketing initiatives can be relatively straight forward when the initiatives involve:

· Limited time price discounts and giveaways
· Coupons
· New product initiatives

However, take caution when using ROI as the single measure of marketing success. Why? Because for many companies, such as McDonald’s, Coca-Cola, and Starbucks, their brands are their most valuable asset. Determining the precise value of a brand at any time, however, is near impossible. The models used to calculate the values of a brand generally rely on many layers of assumptions. So if your company decides to run a TV ad, measuring the impact of that TV ad on your brand’s value or equity might produce numbers that are directional (going up or down). However, because of the assumptions involved in determining brand value, the impact results from your TV ad will certainly not be precise and so cannot be factored into ROI calculation. The results would be incomplete at best and misleading at worst.

Focusing only on ROI initiatives can impact the total brand experience and reduce the brand value in areas such as:
-Customer satisfaction
-Customer loyalty
-Employee moral
-Motivation of distributors
-Differentiation

Let’s look at an example. Starbucks decided that on way to increase revenues was to start selling breakfast. Though this seemed as if it would produce and excellent return on invest, the smells of breakfast foods began to fill the stores in the morning instead of the aromas of savory coffee (which is part of the Starbucks brand). The result was that the store turned into a “McStarbucks” rather than a cool place to hang out and have good coffee. The Starbucks brand suffered from this ROI initiative, and so did the stock value.

These affects that ROI initiative can have on a brand, such as Starbucks, are all important but it is generally impossible to put them into hard financial numbers on a day-to-day basis when calculating ROI. How can you put into numbers that customers were dissatisfied with the smell of bacon filling their corner Starbucks? And how can you put into hard numbers the importance of maintaining brand integrity?

For dealing with questions with respect to the ROI on a marketing initiative, it is best to take a big picture approach. Consider your company’s objectives and strategies and identify the measures that best work for each marketing initiative. As seen in the case of Starbucks selling breakfast, focusing only on ROI can be harmful to your brand, thus harmful to your company.