Marketing

6 ways to better measure your marketing ROI

January 2020 Written by Papirfly

Every marketing campaign is an investment. Whether it’s the money you put into the tools you use and the advertising space you buy to bring those campaigns to life, or the time and expertise exerted by your employees. The real question is how can you be certain that your marketing ROI is living up to your expectations?

Well let’s start at the basics – what is your marketing ROI? It is the process of attributing revenue growth in your organisation to your various marketing initiatives. It determines how much of a return you’ve seen on your investment across your various campaigns and processes, and provides a solid indication of whether your techniques are delivering.

At its bare bones, your marketing ROI is designed to establish:

  1. The financial cost of your marketing strategy and implementation
  2. The financial gain coming directly from your strategy and process
  3. Whether these gains match expectations and your approach is worth repeating

 And, with the consensus suggesting that the ROI in marketing should ideally sit around a 5:1 ratio or greater, being able to measure this is crucial to determine if your money, time and other expenditures are paying off in the long run.

This leads back to the first question, and it’s one that marketers continue to struggle with to this day:

  • Only 22% of marketers believe they are using data-driven marketing initiatives
  • Just 44% of CMOs can confidently say they can measure their marketing ROI
  • A mere 21% of marketers use analytics to measure their marketing ROI
  • 74% of marketers feel they cannot measure and report their contribution to their company/client

The challenge of measuring ROI in marketing

Why the lack of assurance? It’s because measuring marketing ROI comes with a variety of challenges and difficulties that other aspects of your organisation might find more black-and-white.

These challenges include:

Existing measurements are too simplistic
While there are an extensive number of metrics out there that can be used to indicate marketing ROI, there are so many factors to consider that these often don’t tell the whole picture – weather, seasonal trends, changing customer behaviours, etc. This makes it important to establish a base of key metrics to prioritise, but will these tell the whole story?

Marketers prioritise the short-term
Methods of measuring ROI and results of marketing campaigns like email click-through-rates and social shares are often too short-sighted to base the overall ROI of your marketing efforts. With many marketers concerned with the short-term success of campaigns, it illustrates the need to segment these and determine their ROI separately, rather than try to blend all your marketing into one lump sum.

Most campaigns cover multiple channels
The spectrum of marketing channels available to organisations of any size is incredibly broad:

These and more play a distinct role in a company’s overall marketing ROI. It is important to treat these independently to determine accurate results before bringing the results together to determine the combined effects of your marketing initiatives.

Many aspects of marketing are difficult to quantify
Certain goals of marketing teams like boosting brand awareness, customer engagement and other intangibles are a challenge to accurately measure. At their core, the goals of these campaigns are to change behaviours and build recognition, and while certain metrics can indicate that this is taking place, none offer an exact illustration of these results taking place.

Is there a marketing ROI formula?
These and further issues have made the pursuit of ROI-driven marketing more difficult for marketing teams worldwide, despite attempts to establish a firm ROI formula.

At its most basic level, a marketing ROI calculator breaks down as:

(Revenue – Investment) / Investment x 100

However, most would agree that this is too simplistic, as it doesn’t take into account the organic revenue a company generates outside of any marketing campaigns taking place. Say for instance that your organisation’s organic monthly sales growth sits at £5,000. So, if you spend £10,000 on a marketing campaign and gained £25,000 revenue over this period, the ROI formula would actually be:

(25,000 – 10,000 – 5,000) / 10,000 x 100 = 100% ROI

Hubspot has taken it even further with their own marketing ROI calculator, basing it on four core components of determining ROI in marketing:

  • Number of leads
  • Lead-to-customer rate
  • Average sales price
  • Cost or ad spend

This results in an ROI formula of:

(Number of leads x lead-to-customer rate x average sales price) – cost or ad spend] / cost of ad spend x 100

So, while formulas exist to help companies determine ROI in their marketing efforts, there remains a lack of agreement and numerous challenges to accurately determine these values for organisations or any size or industry. Yet, the importance of ROI in marketing is still critical in ascertaining the quality of your campaigns.

To try and add clarity to this tricky situation, we’ve outlined 6 aspects we feel are crucial to measuring your marketing ROI.

  1. Identify the metrics you want to track
    Fundamentally, you can’t measure the impact of a marketing initiative without a clear definition of the results you’re seeking. Before launching your strategy, you need to have a firm understanding of what you hope to achieve, and through this, you can identify several of the key metrics that success will be measured against.

    Your goals and strategy should always be in perfect alignment. By outlining the metrics and KPIs that will indicate your marketing ROI early on, you are best placed to see if results are being delivered where you expect them to. Some of these will be financial, others may not be – as noted earlier, part of the complicated nature of marketing ROIs is the diversity of the outcomes you receive.

    Of course, this also requires you to have accurately identified the costs involved – this is the base you are looking to build from, and if this isn’t noted, you’ll have no idea if the investment was worth the reward.

  2. Ensure that there’s a timeline in place
    Marketing is an ongoing aspect of many organisations, but that isn’t especially helpful when you’re trying to determine its ROI. Instead, it is essential that you put a specific timeline in place when measuring marketing ROI to assess the change in a set, clearly defined period.

    Always remember that your marketing ROI is an ever-evolving value. Whether you choose to measure this across two weeks or two years (or a mixture of both for different campaigns), make sure there’s a limit in place to determine a valid result.

  3. Utilise marketing automation tools
    By harnessing the power of the various marketing automation tools out there, particularly all-in-one solutions like Hubspot or Pardot, you have greater scope to monitor and assess your ROI across multiple touchpoints, not just focus on the end results.

    The fact is that throughout the course of a marketing campaigns existence, there will likely be elements that meet expectations and parts that fall short. Benefitting from marketing automation platforms helps you better identify these variables and refine your strategies moving forward, so you apply best practice in your marketing ROI.

  4. Segment results in your various channels
    Due to the omnichannel nature of most marketing campaigns, especially across a worldwide audience, it is valuable to segment these when determining ROI. The ROI of one marketing campaign or initiative will likely vary wildly from another, and capturing them all in one lump sum doesn’t give a clear indication of what is working and what isn’t.

    Segmenting by audiences, channels, traffic, sales and other variables makes it much more straightforward and accurate when tracking marketing ROI. By taking this deeper insight, you are better-placed to tell if your approaches are delivering.

  5. Dig beneath the surface of your results
    An aspect of measuring marketing ROI that often flies under the radar is not looking further beyond the immediate quantitative data received. In order to get a firm grasp on your true marketing ROI, you should conduct deeper analysis and investigations to understand what results your initiatives are delivering. These approaches include: 
  • Control variables – investigate other factors that could be influencing traffic, revenue and other outcomes to determine what your marketing efforts can take credit for.
  • Cohort analysis – assess the lifetime value your processes offer to customers, helping you present a return on metrics that are difficult to measure.
  • First-touch attribution – where possible, track customers and leads back to their original referral point to ascertain if your marketing campaigns were responsible.

Of course, this will require an investment in time and third-party tools. But, it provides a much greater level of clarity over the performance of your efforts.

6. Talk to your clients/customers/audiences
Finally, it’s helpful to go out and get feedback from the people your campaign matters the most to – your audiences. Whether it’s an email campaign to present new offers to your customers, or an internal employer branding initiative, gauging their response is a way to measure marketing ROI for the more challenging metrics like brand awareness and customer engagement.

Ideally, this should be conducted both before and following the campaign in question. Prior to work commencing, you want to understand your audience’s wants and interests to correlate these to your own strategy and goals. Then, when you survey recipients following, you can see whether the goals were fulfilled and if this demonstrates it was worth the investment.

 Measuring and improving marketing ROI

The importance of ROI in marketing can hardly be overstated. It illustrates whether your achieving results that benefit your organisation overall. It is no wonder that 78% of marketers feel that measuring and improving ROI is among their biggest concerns.

Only by accurately measuring this can you identify and appreciate which of your campaigns and initiatives are performing well, and where there is room to improve your marketing ROI.

If you are interested in improving your marketing ROI, one way you can enhance this is by tightening your processes and boosting efficiency across the journey to market. That is where Papirfly comes in. 

Through our comprehensive BAM solution, you can reduce the time and effort involved in getting high-quality assets to market, with bespoke, intelligent templates enabling your employees worldwide to engage their audience. No waste. No delays. No specialists.

Unlock the power to create, educate, manage, store and share your brand - get in touch with our team for more information, or to arrange a short demonstration.

 

by Papirfly

BAM™ is constantly evolving

make sure you keep up – subscribe to our updates
Related