Some interesting studies from The Wharton School on the negative correlation between “Competitor-oriented objectives” such as market share goals and ROI. I can’t tell you how many times I have had this conversation with people, including those that base online advertising spend on some theory of “share”. “We have to be in the top paid search position to accomplish our brand objectives” etc. Even though being in the top position can result in negative ROMI. “But that’s just the cost of being #1, advertising costs money”. And that’s where I lose them, because even if you are a big fan of brand-oriented / share-oriented marketing strategy, do you walk into those ad buys knowing you are going to “lose money” on them? I don’t think so; there has to be a least some perceived positive benefit.
According to the article, lab experiments with MBA students indicated they tended to choose strategies that maximized competitor-oriented objectives rather than profitability. Is there really a whole generation of folks out there that think marketing is basically a “sunk cost” so it doesn’t matter if it is profitable? That’s insane.
So let me get this straight. We’re starting to turn the corner on the marketing accountability issue; we now try to measure the profitability of marketing. But when faced with an unprofitable campaign, there’s still a giant “fear of failure” safety hatch called “market share”? Please tell me how you explain that to the CFO. No wonder customer retention and LifeCycle Marketing ideas can’t get any traction if this is how people think.
If you’re more interested in profits than market share with PPC marketing, see these excellent guidelines.Share: