In the dynamic marketing world, it all comes down to doing what works, not what other businesses are raving about. And you do not know what kind of approach bears fruit until you try it and measure its results. Therefore, marketers are under increased top-down pressure to demonstrate the value of their activities. Drawing this picture of success has nothing to with empty promises and big ideas and everything to do with facts and figures. Note that nowadays, there are tools powerful and diverse than ever. Thus, you cannot afford to forgo the opportunity to fine-tune your marketing efforts.
Revise the basics
In a nutshell, measuring ROI revolves around the process of quantifying the business impact of marketing. Of course, ROI stands for the ratio of net revenue and cost and marketers use various tools and techniques to link their campaigns to improved revenue and performance across different KPIs. There are many challenges linked to this equation that looks simple on paper. One has to determine the methodology for calculating multiple variables and then tie them to a tangible result.
Establish a basic formula
The first part is rather straightforward. You use simple arithmetic to subtract the cost of the campaign from its net profit. Next, you divide by the campaign cost to come up with ROI in its rudimentary form. Thus, the formula looks like this: ROI = (incremental Profit – Campaign Cost) / Campaign Cost. With advanced analytics tools of today, you can make short work of any calculation. It has really never been simpler to keep track of and report ROI. Alas, moving on, we face various obstacles.
Take a long view
The problems arise when you have to deal with marketing initiatives that have a longer timeframe. Then, the dollars-in vs. dollars-out formula falls short. Take the example of content marketing campaigns, which usually stretch on for months. A single post does not immediately produce a sale or subscription. What drives sales is a stream of cumulative interactions that occur over a longer haul. To make it even more complicated, there could be a number of elusive and unaccounted variables at work.
See the big picture
Factors that often get overlooked are brand awareness, touchpoints, and customer lifetime value. So, let us start with brand awareness. If a company decides to measure it on a short time frame, it could fail to detect any ROI. Even if there are spikes in engagement right away, such as the increase in clicks and comments, it is hard to attribute it to revenue. That does not mean ROI benefits will not kick in later on. The takeaway is that one has to learn to look beyond immediate avail and set up the system for gauging ROI that builds up further down the road.
Play the numbers game
Do not fall for fads and focus just on digital marketing. The traditional school still does the trick and it is possible to prove it with numbers. For instance, in countries like Australia, inbound 1300 numbers are associated with lower, local-like costs. Many companies rely on them to come across as professional and also launch cost-effective marketing campaigns. Here, it is sentential to figure out the response rates see who most suitable targets are. You can evaluate factors like time and location, make inquiries and produce inbound call reports.
Cyclical and cumulative
The whole process of evaluating ROI is not linear as much as it is cyclical. Businesses that realize this are in a better position to quantify and optimize vital metrics and use them as early indicators of success or failure. So, if you really mean to elevate your marketing strategy, improve your ability to track and predict cumulative effects of marketing activities. Avoid the pitfalls of having a tunnel vision when driving traffic and converting it into sales. Employ metrics like customer lifetime value that forecast the total future value.
Attribution across touchpoints
It is of the utmost importance to keep an eye on main touchpoint and recognize how the shape the customer journey and influence purchase decisions. After all, it usually takes more than one touch to seal the deal. The only problem is how to relate separate touch points that led to the sale to ROI. The way to pull it off is via single-touch or multi-touch attribution. These methods refer to the branching of attribution across multiple touchpoints. They complicate the ROI calculation, but the alternative is relaying inaccurate ballpark figures.
For good measure
Every company wants to spend the marketing dollars where they count the most. Consequently, marketers are preoccupied with justifying the short-term and long-term effects of marketing spend on the bottom line. They have to optimize ROI pursuit across different channels and touchpoints. So, if you mean business, account for every marketing activity that contributed to the tangible financial outcome. Gain data-backed insights to support the decision-making process. Grasp how a matrix of interwoven marketing efforts generates resonance, value, and traction in the long-term.
Guest author, David Webb, is a Sydney-based business consultant,online marketing analyst and a writer. With six years of experience and a degree in business management, he continuously informs the public about the latest trends in the industry. He is a regular author at BizzmarkBlog. You can reach him on Twitter or Facebook.