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Summary

Fully entrenched in a recession, today’s businesses would do well to take a “new school” look at an “old school” performance metric and rethink ROI.  Sharan Jagpal, author of Fusion for Profit: How Marketing & Finance Can Work Together to Create Value, suggested “Given the gloomy circumstances many businesses find themselves in today, CEOs and marketing executives need to take a fresh look at standard financial metrics.”

He suggests that there are two glaring problems with the ROI metric.  “First, it measures financial performance without taking into account the level of risk associated with the investment, particularly when assessing marketing strategies.  Second, except for simple strategies, ROI is likely to lead to poor decision---for example, when a firm uses a multimedia advertising strategy, sells products to a common customer base, or sells products that share joint costs."  

Do you think it's time marketers take a new approach to performance metrics?  What will be the next new metric?  Leave your comments here.

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