To understand where marketers of service businesses miss the boat on measuring return on marketing investment, it is important to get a handle on why measuring such return is so difficult to begin with.
First, unlike marketers of consumer products, marketers at service businesses do not have a wealth of measurement tools at their disposal.
Second, the large disparity in the number of clients/customers of a particular product versus those of most service organizations makes traditional analysis of return-on-investment much less accurate for this latter type of enterprise.
Third, word-of-mouth referrals play a much larger role in how someone finds a lawyer, an accountant, a doctor or a financial planner then in how they determine what brand of cereal to buy.
Fourth, some activities have traditionally not been easily measured. Creating a brochure, developing a new web site, writing an article for a trade publication may not actually make the phones ring, yet we know instinctively that they play a part in the overall growth of the business. We just don’t know how big a part.
Fifth, for service businesses, “time” spent by company representatives, professionals, salespeople, etc. is a major marketing cost element. Very few methodologies capture this significant business development expense.
Finally, and perhaps the most important reason why measuring the return on a marketing investment is so difficult lies, in some faulty premises made by marketing decision makers at services businesses.