Measuring the Return on Investment (ROI), i.e. the contribution a particular marketing operation renders on profit and revenue is the holy grail of marketing measurement.
A friendly reminder: this post is not about flabby metrics like eyeballs and views. We’ll only discuss quantifiable evidence indicating towards real outcomes.
Within a company, the marketing department is often inundated with questions revolving around marketing campaigns and the ROI they delivered, if at all they did. While it’s easy to ask such questions, determining a substantive answer can be difficult.
Why, you ask? Simply because:
It’s tough to know when to measure: Any investment on any particular day will have an unique impact at any point in near future. A marketing campaign can deliver results two days from now, or two months later. Nonetheless, marketers must know when to invest and where to invest.
Extrinsic factors: There are numerous variables that are not with the marketing department’s control. What would the marketers claim if revenue increased owing to rising economy, did their campaign delivered the increased ROI?
To better understand marketing ROI, let’s first understand what a company aims at. Once we know we wish to obtain from marketing campaigns, only then can we measure the returns. Some of the Key Performance Indicators KPIs in digital marketing campaign are mentioned below:
General indicators: it includes traffic, reach and leads
Indicators based on channels: search engines, website, social media profiles, blogs, etc.
Indicators based on performance: it includes click throughs, lead generation, conversions, etc.
Think beyond outcome measures
Understand the complex set of activities that positively affect the ROI. This is the first step for measuring marketing ROI.
Suppose that you’re facing difficulties with customer satisfaction and retention for any possible reason.
In such a scenario, if you focus on developing a social media community, the only thing I can imagine is an unruly bunch of unhappy customers wreaking havoc on your social media platform.
Only measure what matters
Like I said above, likes, views, and clicks are not the most important aspects of your digital marketing campaign.
You need clearly defined goals for your digital marketing campaign; goals that run deeper than mere performance measures. The next step would be to create KPIs associated to such goals and measure the KPIS in their entirety.
Metrics alone are not enough
Creating dashboards that display the metrics is futile. This is because statistics require skilled interpretation and don’t speak for themselves.
Also, different users would be requiring different level of analysis. As such, an effective dashboard allows the users to delve further into the metrics for maximum insight.
Once you’ve generated meaningful metrics, the next step would be to
Tie compensations to metrics
It’s important to do so because it makes sure that you don’t face difficulties converting metrics and insights into actions. It also ensures that the employees collectively work towards the direction suggested by these metrics.
This process, however, requires a 3-point approach:
Balance of compensation
Compensate metrics related to marketing ROI
Metrics shouldn’t be affected by extrinsic factors
The Bottom Line
‘Half of the money I spend on advertising is ruined; troubling is the fact that I do not know which half’ – John Wannamaker
This was said late in the 1800s. So to say measuring ROI is something new or unique to digital marketing only, would be misleading.
Now in 2017, when the world is brimming with all sorts of avant-garde utilities, measuring the ROI is still quite a daunting process.
However, marketing is essentially a vital part of a business and if done right, can pay many times over what it costs. Don’t just give in for softer metrics if you need to make the most out of your marketing spend.