The Advent of Financial Standards for Marketing Performance
Imagine marketing spending $1 trillion per year. For roughly half that spending, the return on investment is often vague at best. For the other half, there’s no measurement of ROI…at all.
That $1 trillion is the global annual spend on marketing and advertising. And with global competition heating up, businesses are increasingly looking to ensure every dollar is well spent. $1 trillion is a good place to start.
So business leaders are seeking ways to measure marketing performance, in -financial terms. The Marketing Accountability Standards Board (MASB) has been tasked with creating such quantifiable metrics for marketing. The MASB standards will be similar to those faced by other areas of enterprise, such as what GAAP, FASB, and IASB do for finance.
Why is MASB tasked with this mission of creating universal marketing standards? Because there are none. That’s right, for $1 trillion, there’s no governing body, no universally accepted standard, for performance. This creates many problems. When a CFO leaves a company, reporting and standards remain the same. When a CMO leaves a company, everything changes.
This lack of standards explain why CEOs at most major companies feel it’s difficult to quantify marketing’s contribution to the bottom line, and why they’re increasingly expecting marketing to provide proof.
In surveys, CEOs frequently report they don’t trust or value marketing. The advent of standards will enable CEOs and CFOs on the one hand, and marketing on the other, to have a common language. And this will also usher in an era of marketing proving – or disproving – it contribution to the bottom line.
According to MASB Director MJ Tisor, “Marketing will move from discretionary business expense to board-level strategic investment, only through an independent standards setting ‘authority’ for measuring (forecasting & improving) the financial return from marketing activities.”
Conclusion: improve your measurement of ROMI now to prepare for upcoming standards.
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