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Calculating Marketing ROI in a Complicated Landscape
Demonstrable ROI is the ante to get marketing a seat at the big table in the C Suite. But how do we calculate it in a world of proliferating marketing channels?
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Marketing ROI: It’s Not as Easy to Measure as It Used to Be
By Mark Semmelmayer
Chief Idea Officer
Pen & Inc. Marketing Communications
Before computers, smart phones and social media, calculating ROI was pretty straightforward. You counted leads from print advertising, telemarketing, direct mail and trade shows. You divided your marketing budget by the number of leads, to get a cost per lead. You tried to determine which leads turned into sales and the revenue those sales generated, or, barring that, you calculated incremental sales during a measured period against a previous period. Voila! ROI.
Even then, there was a flaw in the process. B2B sales have a longer cycle and more touch points than a B2C sale. Marketing programs were just one component. Other factors, like customer trust/perception of your brand, sales force effectiveness (in my experience, the volume of leads never followed up on by sales made me cringe . . .), and peer-to-peer communication among buyers, all play a part.
B2B has a smaller customer base, higher price points, and a buying decision process influenced by information and reputation. We need to broaden our ROI horizons to embrace both hard and soft metrics. The real challenge? Determining what to measure, and establishing success demonstrated by those metrics against your marketing and sales objectives.
First Things First: Create a Plan and Plan to Measure
“Failure to plan is planning to fail.” That phrase is on the money. Today, the best way of calculating or proving ROI to senior managements is to create a multi-channel, integrated, marketing communications plan (IMC) that includes a “sub-plan,” defining where results will be measured, and how, to demonstrate performance against stated objectives. With buy-in from the C Suite and other stakeholders, you’re all on the same page and ready to go to work.
Is there a secret formula you could use in creating that measurement sub-plan? If there is, I don’t have it. Perhaps some digital alchemist might someday discover one, but it’s not here today. There are a full host of communications channels, both traditional and digital, for you to use. Which you choose, and how you use them and measure them, is unique to your plan. What I can offer are some guidelines to frame your thinking.
Is it Return On Investment or Return On Impressions?
Marketing is a long-term, multiple touch process that leads to sales growth over time. If you’re seeking a real “bottom line,” the key Return on Marketing Investment success indicator is when incremental sales are greater than campaign investment. But, there are variables within the campaign, each of which plays a part against objectives.
In May, 2014, Forbes published an article, Understanding the New ROI of Marketing. It’s premise:
No longer does ROI stand only for return on investment. Today, ROI also stands for return on impression, which encompasses two primary values — a hard metric and a soft metric. But the new ROI of marketing goes even further than investments and impressions. It also encompasses return on engagement, objectives, and opportunity. Today, people share information via the social web faster and more frequently than ever. Traditional ROI analysis is just the tip of the iceberg.
OK, I Get That. So What Should I be Measuring?
Borrowing from Forbes and other sources, beyond lead counting, sales tracking and revenue calculations, here are some guidelines for ROI measurement today.
A soft metric to track the return on impression valuation is the number of people who actually see your ad, marketing material, or other tangible marketing piece.
The return on impression metric is also a soft metric focused on the value of an essential component of branding . . . buyer perceptions of the brand.
Measuring return on opportunity evaluates the opportunity a specific marketing initiative presents, versus the time and money that effort requires.
In social media, return on engagement is a critical measure of performance analysis because the conversations, sharing and word-of-mouth marketing online can make or break a marketing initiative.
Analyzing return on objectives requires accepting that not all goals are measurable with hard data. Sometimes, marketing efforts simply help a business move in the right direction.
Return on Marketing Investment Best Practices
In the end, marketing is about contributing to increased sales and revenues. There are many possible ‘returns’ on marketing investments in the new age. For the sake of peace and clarity in your organization, and the ability to articulate realistic objectives, agree in advance if your ROI for various aspects of your program will be based on:
- Targeting ‘top of the marketing funnel’ returns, such as increased online brand mentions, or new website traffic, for example
- Driving more leads through the “middle of the funnel,” targeting new trial starts, content downloads or new newsletter subscriptions, for example
- Targeting the “bottom of the funnel” marketing goal that connects all others: new customers and new sources of revenue.
Whether targeting the top or bottom of the funnel, short-term or long-term, measuring marketing’s progress toward its goals, against the time and money invested, is still the critical path.
- Market research needs to be a plan component. A “bounce-back” survey to users downloading content (require their email address for download) is easy to deploy. Any email database collected can be surveyed. Regularly survey new and existing customers. This is the best way to explore soft metrics like brand perception.
- Consider enhanced interactivity for your website. When a user visits a specific page, use a pop-up that says “I see you’re interested in ABC. Would you like to talk to someone about that?” Use cookies. If they return, use an “I see you’ve been here before. Would you like to talk to someone about ABC now?” dialog to further engage the customer. This can expand data on website effectiveness and, potentially, result in an actionable lead.
- Qualify leads. Period. Like all of us, salespeople are pressed for time. Give them confidence that a lead is ready to buy, not just a cold call. There are many marketing automation platforms that can help with this. If you don’t want that trouble or expense, telemarketing qualification or a quick “how interested are you?” email can move the prospect up in the seller’s hit list. Better leads, better sales. Better ROI!
Need more information?
Mark Semmelmayer
Chief Idea Officer
Pen & Inc. Marketing Communications
Marietta, GA
770-354-4737
LinkedIn
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