For many multinational consumer packaged goods providers and retailers in China, the concept of marketing return on investment (ROI) has yet to be truly adopted — to their detriment. Although these companies hope to increase sales among the vast and expanding Chinese consumer base, their marketing campaigns, by and large, are disconnected from measuring profits and lack a clear picture of which marketing efforts drive increased sales and at what cost. Much of the inability to calculate marketing ROI in China can be pegged to a lack of sufficient data about past and present consumer activity, the seasonal effect on sales, the value of prior promotions, brand awareness, and changing consumer preferences, among many other factors. Without these metrics, it is virtually impossible to determine which marketing dollars actually produce an ROI and which are spent unproductively. Frustrated by the lack of real marketing ROI data and in the dark about how to earmark their marketing budgets, multinationals all too often simply bring to China the advertising, promotion, display, and discounting techniques developed elsewhere in the world. Not surprisingly, this approach lacks impact because the cultural and business differences between Western countries and Asia are too great.
Overcoming this marketing ROI handicap could mean the difference between surging profitability in China and spinning wheels with little in return. In our view, a carefully calibrated marketing ROI strategy in China could yield returns of 1 to 2 percent of sales or 10 to 20 percent of total dollars spent. Simply put, collecting the right data and developing a rigorous strategy for calculating marketing ROI for every promotional campaign are absolute essentials for doing business and succeeding in the dynamic Chinese economy.