Similarity between Recognition & Marketing Spends

I was chatting recently with a college buddy who happens to lead Marketing initiatives for a popular consumer brand in India. After the initial chit chat about how things were going for each other, he started venting his frustration about him having to repeatedly spend significant time and effort in justifying the investments the company was making in marketing. The three questions he grappled with all the time were the following:

1) By doing this marketing initiative what is the direct short term impact on our Product Sales & Profitability?

2) Have our competitors invested in a similar marketing initiative?

3) Can't the marketing initiative be rolled out at a much lower cost - say 10% of the proposed cost?

Impact on Sales & Profitability:

ROI (Return on Investment) calculations for marketing can be quite complex because of the all the variables involved. If "x" is the amount spent and "y" is the increase in sales in the next quarter, and "z" is the % increase in sales attributable to the marketing initiative, then the ROI = (z*y)/x. The trouble with this calculation - while "x" and "y" are easily measurable figures, "z" is a subjective figure that needs to be agreed upon. Why? Typically alongwith the marketing initiatives, there are other efforts which are made to improve sales - maybe sales training, better short term incentives for sales reps, better consumer spending climate etc. You can even argue that the impact of the marketing initiative is actually non existent and you could have achieved the increased sales simply because of all the other factors.

Investments made by Competitors:

My buddy went on to tell me how easy it was to get marketing budgets approved for doing similar things that their competitors had already done - e.g. if our competitor has sponsored a cricket match, getting a large budget to sponsor the next cricket tournament was easy. No questions were asked about RoI etc. - essentially, if they are doing it, then it must be working - so let's do it.

Actual Cost of the Marketing Initiative:

Even after the marketing initiative has been approved in principle, questions are asked about every rupee that is proposed to be spent - Can't we hire a cheaper photographer for the photo shoot, can't we advertise only in the metro cities etc. All this after the marketing initiative proposition provides a clear analysis of why and what we are recommending. It is as though, people start thinking about the spend, once they have approved the marketing initiative in principle.

If you look at the above scenario, companies view "Employee Recognition" initiatives the same way. It starts with the question on whether "Employee Recognition" spends has a tangible impact on any key employee factors (e.g. Employee Retention), and if yes, to what degree? This is highly subjective - should this number be 1%, 5%, 10%, 15%?

Next, what are our competitors doing? Again, if they are doing it, then it must be working. So let's do it.

Third - Do we really need to give out 2000 rupee trophies - can't we just do printed certificates? Does the spot award need to be 500 bucks - won't 100 bucks suffice?

In practical terms, both marketing expenses and Employee Recognition expenses are viewed as costs and not as investments. So the key to create buy-in for a long lasting Employee Recognition program would be to start with a small budget, identify the key factors you want to impact using the program (e.g. Employee Retention & Engagement), put in place mechanisms to measure & monitor the investments made, make some assumptions on the impact variables (prior to the launch of the program) and compare the returns with the other investments being made to improve the same factors - Employee Retention and Engagement.