If you can’t prove your Marketing ROI, your department is in trouble.
Return-on-investment (ROI) is likely to be the most important metric for just about every CMO. There, we said it. Gartner said it, too. And while determining the financial impact of your marketing efforts is crucial, it is easier said than done.
Naturally, the main reason you’d want to measure your ROI is to avoid spending money on marketing activities that don’t generate enough leads and, essentially, revenues.
According to recent findings by Gartner’s CMO Spend Survey 2017-2018, marketing budgets have gone down from 12.1% of company revenue in 2016 to 11.3% in 2017. “As CMOs survey the landscape, one thing is clear — previous budget increases have come with weighty expectations, some of which have yet to be met,” says Ewan McIntyre, Research Director, Gartner for Marketers.
Today, more than ever, CMOs are expected to prove the positive financial impact of their marketing efforts. And despite the challenges, they seem to be on the right track.
Gartner’s report shows that the largest share of marketing budgets, 9.2%, is spent on marketing analytics – a clear sign that marketers are willing and increasingly able to track and measure their performance, and their ROI.
Finding the right way to measure your marketing ROI
On the one hand, measuring your marketing ROI can seem like a rather straightforward thing:
You plug in your performance data in a simple formula and you’re done. On the other hand, however, ROI in marketing is not a one-size-fits-all concept. You need to base your calculations on the specific business context and decide whether you want to focus:
– On your entire marketing mix or only on certain efforts (e.g. search ad, email campaign)
– On one single channel (e.g. social media, email, search) or many
– On short- or long-term returns
Taking your business context into account is particularly important since the highest marketing ROI does not always translate into the highest long-term profit and value for your (or your client’s) company.
“Marketers sometimes forget (or ignore) the need to frame Marketing ROI in context of a “hurdle rate” – the minimum return the company should expect from a given level of marketing investment,” writes Daniel Kehrer, Senior VP of Marketing at MarketShare. “The idea is to maximize profit, not necessarily MROI. It’s basically the difference between being efficient (obtaining high MROI) and being effective (driving maximum profit and long-term value).”
A recent survey among 2,500 digital marketers identified the efforts that generated the highest ROI, with email marketing being the most cited among agency professionals, followed by content-, social media marketing, and search pay-per-click (PPC). “High-funnel metrics such as opens and clicks lead the way with agencies, [with] 31% stating these are the metrics they’re rewarded on.”
Spend today, measure tomorrow?
The fact of the matter is that marketing brings both short- and long-term benefits to a business, yet the short-term ones are often easier to recognize. If a campaign manages to attract X new paying customers only a week after launch, then its impact is already obvious. What’s more, you will likely make your CFO happy. Most likely your Sales team as well, even though there is something like
At the same time, a campaign could also be the trigger for potential customers to learn more about the brand and perhaps later become paying customers. In that case, the ROI is a lot less straightforward. At the end of the day, consumer behavior may be the result of a decade of marketing efforts.
Measuring your ROI should, thus, be based not only on the leads and new customers you attract as a result of a specific marketing activity but based on the overall value customers derive from your brand.
Even if people are not making purchases NOW, your marketing may still be influencing their spending behavior by making them aware of your brand, what it offers and its uniqueness compared to competitors. Those are people who may, one day, start spending their money on you. After all, every single person engaging with your brand is a contributor to the overall marketing ROI.
You have to work and wait for your ROI
The key is for CMOs to find the golden middle between short-term sales and long-term strategy in order to drive business growth. How should you spend your marketing budget – what works, what doesn’t work so well, and what is simply a waste of money? The only way to know is to keep a close eye on your marketing data and analyze it on a regular basis to gain the insights you need to answer those questions. Easier said than done, yes, but certainly doable. Find out who can help you get your data and how to make sense of it. Follow these three steps to master your ROI and make your CEO happy:
1. Start small and grow your expertise
Yeah, we know. We told you to take the high road and include all your expenses into the calculation to get the real big picture of your investment. But we know this struggle by heart from our own business. Before you start building the perfect, think about the KPIs and number that you have. What insights can you get from them?
2. Find the right partner to tackle this problem
You have to face it: you won’t be able to do this on your own. First and foremost, build relationships to your finance, BI and product teams to have them work on this problem together. To see your ROI, you have to look far beyond your campaign time frames and those partners will be able to support your activities with the needed numbers. Also, your CEO will value your leadership and team spirit!
3. Consider this a long-term project
Marketing success does not happen overnight. Nor does your positive ROI. Patience is more than just waiting for your results. Accept this process as necessary and try to find quick wins from short-timed insights. You will have to learn how to connect the dots, work with the right people, get all the data you need to make this project a success. Also, make sure to work with the right tools: you need the right data for the right insights – there is no point in this whole project without accurate and meaningful data. Last but not least: depending on the industry you are working in, sales cycles can last a long time. Looking at the average lead run time at Adverity, this can easily take 6 months before we close a deal and the author gets his sweet sweet marketing ROI. The wait is always worth it.
This DMWF Guest post was written by Adverity – www.adverity.com – Gold Sponsor at DMWF London 2018 – www.digitalmarketing-conference.com/global