As the number of channels available to marketers’ increases, so does the pressure to prove their worth by showing a tangible ROI. In an environment ruled by data, business owners and marketers can struggle to quantify the link between expenditure and the bottom line.
We all know advertising works, but accurately measuring the degree of effectiveness poses all sorts of challenges. Many digital assets stay around for quite awhile and can be passed from pillar to post, making them extremely difficult to monitor. Despite this, the analytics provided by online resources has led to a projected increase in digital marketing spend by 13.2%, while traditional advertising spend is forecast to drop by 3.2%.
Analytics tools go some way to solving the digital problem. Most online platforms will track the popularity of social media posts or Google adverts, but there’s a big difference between someone seeing an ad, and an ad actually motivating someone to take an action.
Why measure marketing ROI?
Marketing is a more fluid environment than ever before. Technology used correctly empowers businesses by giving them the tools to constantly monitor and refine their marketing to ensure they are achieving the best return on investment.
Gauging the success of offline and online marketing provides the groundwork for your business to build upon. This can be even harder to measure, yet equally as crucial, when you’re performing B2B marketing, especially when a complex sales cycle is involved.
With only 37% of managers confident they can prove the short term impact of their marketing, accurately measuring your marketing ROI, and adjusting accordingly, can provide a competitive advantage over your competition.
A well-planned strategy can help you gain insight
It’s hard to measure something you haven’t clearly defined. Knowing your marketing goals doesn’t mean you have to go into the minutest detail of every aspect, but just ensure you have a clear understanding of what you’re trying to achieve and how you’re planning to make it happen.
Without a defined strategy, it becomes hard to make changes in a meaningful way. It’s the equivalent of trusting your Sat Nav to take you to a destination without telling it where you want to go. Even if you are able gauge the many variables and compile useful data, you’ll have no way of knowing if the results are moving you closer to your goals.
Creating a clear strategy also means success can be repeated. If something works well, you’ll already have the blueprint to repeat the process in a relevant way. As campaigns progress, it can be easy to feel lost in a mess of details and data, but maintaining a clear and simple strategy will provide you with a reference point to draw your focus back to the bigger picture.
So how do you calculate marketing ROI?
When it comes to calculating your ROI and proving your marketing is working, there are a few things to consider:
Keep it simple
When you’re constantly being bombarded with analytics and statistics, it becomes easy to get distracted by, or even obsessed with, vanity metrics and points that aren’t meaningful. Always keep an eye on your overriding figures. Ask yourself regularly:
- Has their been an increase in your revenue?
- What has the marketing campaign cost?
This is the most basic form of discovering if your marketing is paying off. It may sound incredibly simple, but it’s easy to lose sight of even the most obvious indicators when you’re in the throws of a complex marketing campaign.
Measuring the cost of a campaign is fairly simple. It’s just a matter of adding up all your expenses and the time spent. However, ideally this will be broken down into the various resource spends so you can adjust the amount you’re investing into each resource according to its effectiveness.
Popularity doesn’t always equal conversions
You can create a lot of waves on social media without seeing financial gain. Engagement doesn’t always equal conversions. However, tracking your engagement in relation to any uplift in sales does start to build a picture of how the two figures relate. You can even test the relationship by making predictions about revenue increases in relation to engagement analytics.
Understanding the cause and effect will give you greater insight into the many variables. The more variables factored into your strategy, the more aware you’ll be of how different actions affect your campaign.
Other factors worth considering
As well as keeping it simple, and mapping engagement against conversions, there are a few other factors to consider:
This can provide a great tool for marketers to test the water with different strategies, such as content type, channel, content, landing page design etc. It provides specific data about how certain demographics respond to your marketing activities.
This allows you to build a clear picture of what brings the best return on investment for specific customer types. It also tells you which groups of people are the most responsive and allows you to better target them for a greater ROI from your marketing.
Cohort analysis is a great way to compare variables between different digital marketing campaigns. It provides the essence of analytics by clearly showing what works and what doesn’t. When interpreted correctly, any fine-tuning you need to perform will be obvious and data driven.
Not many (if any) potential customers will see an advert, no matter how great, and then go and buy your product. Successful conversion is a journey, and customers will come into contact with your business in a variety of ways.
Making sure each point provides a great customer experience will help to reduce the number of touch points required to make a conversion. Increasing your number of potential touch points will also increase the likelihood of potential customers experiencing them in a shorter timeframe.
The average number of touch points needed for successful conversion varies between sectors, but nearly without exception, the number is greater than one.
Successful marketing will require refinement to ensure you get the most bang for your buck. You can measure social media ROI, traditional marketing ROI, and track all your marketing related expenses, but without clearly defined goals you won’t know if you’re moving in the right direction.
Ultimately, a successful marketing campaign must be able to quantifiably demonstrate it has contributed to the bottom line. Achieving the best return on investment requires a data-driven approach. Create a strategy that ensures all the data is used to move you closer to your goals.
Marketing goals allow you to navigate the difficulties of calculating your marketing ROI. Define success for your campaign, attribute campaign impact and use the data to understand and refine your efforts.
For more research and statistics about the current state of Marketing, click here.