Most marketers don’t understand ROI (or basic accounting) according to scathing study
A new study has lambasted marketers’ financial skills and the marketing programs run by education providers, claiming that as many as 90% of marketers are not trained in marketing performance and ROI, partly due to the fact that nine out of 10 marketing courses don’t have a unit focused on the topic.
Because of this educational void, 80% of marketers struggle to properly demonstrate the business effectiveness of their marketing spending, campaigns and activities to their top management, the report says.
The findings were identified by Fournaise Marketing Group, which is, of course, a marketing performance measurement and management company. One of Fournaise’s ongoing programs measures the performance of marketers each year by interviewing CEOs, management and marketing decision-makers across North America, Europe, Asia and Australia. It also monitors the effectiveness of 2.5 million B2C marketing strategies, campaigns and ads broadcasted across all media channels in more than 20 countries.
The findings determined four primary trends that the authors say are prevalent in businesses.
First, 67% of marketers don’t believe marketing ROI requires a financial outcome, demonstrating a total lack of understanding of what ROI is all about. Notably, these are also believed to be the marketers who struggle to give correct mathematical formula for marketing ROI.
Second, 64% of marketers use brand awareness as their top KPI for ROI, while 58% place Facebook likes, tweets, clicks and click-through rates in their top five marketing ROI KPIs, and 31% believe measuring the audience they have reached is marketing ROI.
Third, 63% of marketers don’t include any financial outcome when reporting on and presenting marketing results to their CEOs and top management.
Last, more than 80% are unable to write a P&L and balance sheet correctly when given a simple business scenario. These marketers are unable to give the correct definitions of basic financial KPIs used day in and day out by CEOs and boards, such as earnings before interest, taxes, depreciation and amortization (EBITDA), price-earnings ratio (P/E ratio) or return on equity (ROE).
Furthermore, they are unable to correctly explain the impact marketing can have on a company’s balance sheet. This demonstrates an inability to understand and speak the financial and accounting language that they are required to be proficient in, the report says.
“It’s an education problem, at two levels”, says Jerome Fontaine, CEO and chief tracker at Fournaise.
“We analysed the content of hundreds of marketing degrees and diplomas around the world and noticed that 90% do not have any specific training on marketing performance and marketing ROI. So we can’t be surprised if marketers with a marketing degree struggle with them,” he says.
Fontaine also said this: “We tracked that 85% of marketers are well educated, but unfortunately more than 50% have degrees or diplomas in a non-marketing-related field such as English, history, economics, journalism, sociology and foreign languages. These marketers do not know enough and do not master enough the critical marketing techniques and formulae and are lost when it comes to marketing performance and ROI.
“In other words, every Tom, Dick and Harry is a marketer, lacking the scientific and financial knowledge necessary to inform and optimise the creative side of marketing. CEOs have told us again and again: they want ROI marketers. That is, 360-degree performance machines trained to deliver real business results and prove/optimise ROI.
“As long as marketers continue to fail to get trained in, master the use of, and optimise marketing performance and marketing ROI, they will struggle to demonstrate to CEOs that they are not money spenders who jump on and hide behind the latest fads and blow smoke, but real business generators.”