Unconventional Inspiration on Marketing ROI and Making the Gut Call

Arrow Electronics is a $23 billion company, they’re the newest sponsor of the fabulous “Queen of Shitty Robots” and (incidentally) I’m proud they’re a customer of our influencer marketing and research company Little Bird .

Arrow’s CMO Rich Kyleberg did a great long interview on CXO Talk earlier this year but I just listened to it this week and have already referred to it many times.

There’s one section of the interview in particular that I want to share with you. That CXO Talk videos are all transcribed makes that all the easier. I just pasted the part about (brand) marketing ROI below, for your enjoyment.

Here’s the full video that includes the text excerpts below.

I also want to share this part, about digital transformation and adoption of new content, campaigns, and initiatives. I love this.

“The only way to get the adoption is by insisting on quality of work,” Kyleberg says.

“Not some corporate mandate because you know, I report to the CEO, or I’m in the corporate headquarters, none of that…the key to adoption, which I know that a lot of marketing folks struggle with, is not so much worrying about adoption. It’s worrying about the quality of production and the quality of the distribution of those messages, because if we do that right there’s not really — you know, it’s not an adoption question, it’s like, ‘Can we have that. Give that to us. That’s great. Oh we didn’t have access to something like that before’.

Here’s the part about ROI and gut calls.

Michael Krigsman:

(16:38) How do you think about the ROI of your marketing efforts? These days everybody is very very closely trying to associate ROI with their marketing. How do you think about that?

Rich Kylberg:

(16:51) Thank you for asking the question. I have a bit of a rebellious I think is the best way to describe an attitude towards that because I believe that the ROI question is a false one to begin with. I believe it’s false because I do not believe anywhere in the world there is a system to accurately measure ROI on brand marketing. Because I think if it actually did exist and someone had it, well they would use it and they would be the greatest brand on the planet, and they would be the only great brand on the planet because they would have measured everything to the point where they optimized everything and it just works.

(17:31) But branding also changes. Once you optimized something you’ve got to change constantly. So the idea of measuring ROI to me is a question of how much money are you going to spend on measuring something, where I’ve got a budget and I try to divide my budget into two categories. Two categories really, one is content creation and one is content distribution. And I believe that’s all there is that in marketing anyway is your message and how you distribute it, and I believe marketing works, if marketing works than the average message, with average distribution works.

(18:12) Now, I can’t tell you from an ROI perspective whether it returned the average campaign return of 1.6% or 3.5% or 7.8, or 1600%. But I believe that the average marketing campaign probably cleared the average company’s capital hurdle rate, capital cost rate, well they wouldn’t do it. They would stop all marketing; every company on the earth would have stopped it. Nobody is stopping it why? Because the average one works.

(18:41) So from my perspective if I’ve got an average message with average distribution, it’s going to have a positive ROI. Now, the question is was that positive ROI 2%, 2.6%, 3.8%, and how much money do you want to spend dancing on the head of a pin like that. And I’m not saying we don’t measure things, and I’ve got some studies here that can indicate, for example we worked with a firm on Arrows reputation that indicates that you know, in their way of looking at and analyzing things one could argue that over $1 billion of Arrow market cap is attached to reputation.

(19:18) That takes me back to something where there is a Professor at the Harvard business school, professor Deshpandé, and I saw this slide and I thought it was brilliant. He said your brand is not your trademark. Brand is a trust mark, and a trust mark to me leads into reputation, and reputation I think can be measured and monetized. Because I think if not then you know why would any of us disagree that if we had a chance to open up a soda company and they would say, yeah you can use the name Coca-Cola we’d probably want to use that name because it has value right. I mean I feel that I’m arguing with something that is so obvious that it is just silly right, but at Arrow Electronics one can argue that a substantial amount of value is attached to that brand. And it’s our job to see if we can improve on that value, and maybe we can see it through those studies or whatever. But at the end of the day you know one of three things is going to happen.

(20:23) We are either going to do nothing, and the brand is just going to be the same and we’ve spent all this money and nothing is going to come of it. Or we are going to spend this money and actually going to hurt the company somehow. Well I’d be allowed to do that for about a week and I would be fired. Or, we’re going to improve the position of this company in the marketplace.

(20:42) Now specifically how much? Good luck measuring that, but as long as we continue this work, and as long as the feedback loops in terms of the number of people applying for jobs here, the quality of people applying for jobs here, the customers and suppliers telling us ‘I really loved your message, I like their vision of your company’. As long as our employees are saying, ‘I’m proud to work here, and I’m proud of these messages, and I’m proud to be sitting here watching the Super Bowl this week and there is an ad from my company. I’m proud of this company’. As long as we get that feedback, the precise ROI I don’t know what it is, but I think I’ll keep my job for a while.

Michael Krigsman:

(21:20) So essentially what you’re saying is in the broad mix looking generally at the marketing activities and looking at the marketing results, and measuring where you can measure, at the end of the day there are essentially judgement calls that have to take place because you can’t measure it all precisely and you can spend your entire budget trying to measure it all precisely.

Rich Kylberg:

(21:45) That’s exactly right. I believe that in every marketing decision ends with a judgement at some point. Now the question is how much data do you amass, how much money do you spend, how many cycles do you spin, how much time do you let pass before you get to that marker and you meet your professional decision, and you live with the consequences of it.

(22:08) Okay, I tend to believe that you’re going to get a higher rate of return if you’re able to accelerate that decision point okay, to where you are comfortable enough in your background, in your training, and your team, and your partners to say we are professional. This is good work, test it, and do whatever you have got to do to get comfortable, and then you make that decision and you move. I think that the faster you can do that the more competitive you can be in the marketplace, and the less resources you’re going to spin up trying to measure. Like you know, if I’ve got to spend a lot of money checking what I’m doing around here, then I would make the argument that the CEO ought to find somebody else for my job who doesn’t have to check all that stuff to be able to move the company forward and make decisions.

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