Return On Investment, or R.O.I, is one of the most important acronyms in any marketer’s playbook.
Measuring the results of any marketing activities is non-negotiable, particularly with digital platforms serving up so many real-time metrics.
But often vanity metrics can be mistaken for success, and to be a real measure of return, clients should understand their performance drivers at every stage of their buyers’ journey.
Traditional metrics such as cost v revenue are still essential but so are recipients, engagement, click throughs, equivalent advertising value, as well as conversions. Knowing what to attribute as a campaign outcome can be as important as capturing it.
Whenever we plan a campaign for a client, regardless of channel, the budget, tactics or messages, the return on investment – time, budget, resources is something we focus on a lot.
What is ROI in Marketing?
Marketing ROI is often considered the practice of attributing profit and revenue generation to the impact of marketing initiatives. By calculating (sales) return on marketing investment, organisations can measure the degree to which marketing efforts either holistically, or on a channel-by-channel or a campaign-by-campaign-basis contribute to revenue growth.
Typically, marketing ROI is used to justify marketing spend for ongoing activities or better, identify required budget allocation for future campaigns and initiatives.
But ROI can be so much more than that.
Types of ROI
Spoiler alert, it’s not all about sales! Ok, it has a lot to do with sales, but sales don’t always come as an instant response, sales might require a prospect to engage on multiple occasions, with multiple campaigns, or sales might come months after a campaign was launched.
Also, returns at the top of the funnel will have a direct impact on the successes further along it, so pinpointing the ‘returns’ at different stages of a campaign will allow you to make improvements to the total outcomes later on.
Whether you sell by time, units, views, visitors or ranking, there are a number of ways to measure Return On Investment.
Understanding what you want to measure, before you start a campaign is therefore a key indicator of its success.
Let’s take a look at how different measures of ROI can be used across some of the more common marketing channels:
Social Media Paid Advertising ROI
Otherwise referred to as PPC. Across a range of platforms such as Amazon, Google, Microsoft or TikTok, perhaps the most common ROI metric is Return on Ad Spend (ROAS), which indicates the value of the customers engaged via paid ads, versus the actual cost of advertising.
Sub metrics include the reach, engagement, and click throughs of your ad sets.
Email Marketing ROI
Email ROI can almost never be calculated on the first click. But it is spectacular at nurturing and converting leads when it’s used well.
While the obvious metrics will be the cost of a mailing platform versus the eventual sales each e-shot or email campaign delivers, there are many more measurements to consider, particularly when email can support so many stages of the sales funnel or buyer decision.
Email marketing ROI also depends greatly on the quality of your database. GDPR rules have sought to reduce but also improve the leads held on a database but still their quality and propensity to engage with a brand is vital.
Search Engine Optimisation (SEO) is all about your ranking position on search engines like Google. SEO should be a staple of any brand’s online marketing mix because of the returns it can generate. But it isn’t a quick win, and it can take three to four months for the SEO activities to have a real effect on Google searches.
It goes without saying though that the higher your brand ranks, the more traffic it will get and – if you have your pricing strategy nailed -the better your conversions will be.
Traditionally, the ROI of a PR campaign was measured in equivalent advertising value, EAV, or how much it would cost to take the same space in a media title with a paid ad. This though is rather outdated.
We also look at tone of voice – are articles positive or negative about a brand, does it have message pull through – are the product or service’s key messages included or in a digital world, how many hits does an article get.
The third measure can be misleading – hits don’t always equal conversions. A better measure on investment might come through Google Search Console which could show that based on backlinks, articles secured on third-party sites drove a number of qualified leads to a web site.
Other measurements could be used to gauge the return on investment of a PR campaign. If the campaign was supporting a new product – how were product sales affected, or how many more followers were picked up on social media channels?
With retail brands preparing to cash in on the Black Friday sales phenomenon, and adopting an Amazon heavy approach it is worth noting the ROI on this platform specifically.
With Amazon’s purchase driven metrics, all activity can be attributed directly to a sale, non-sale outcome. Therefore, pound for pound, successful Amazon advertising is often easier to quantify versus any other social media or Google advertising.
As a platform, Amazon provides granular data to support strategic decisions on whether to continue with a campaign; ramp it up, turn it off, add different products, set different targets within the advertising console, and it’s one hundred percent based on sales.
Fundamentally brands know what they are paying for advertising, what amount of impressions they get, the number of clicks this leads to and fundamentally what sales revenue this generates.
Measuring Multiple Touch Points
It takes, on average, 6-10 touch points before a consumer reaches a buying decision. In order to truly measure marketing ROI at the granular level, marketers need to understand the impact of both online and offline touchpoints across their strategy and the relationship between these touchpoints and their position in the sales funnel.
Often, because of their integrated nature, when executing omni-channel marketing campaigns we will look to measure these returns by channel as well as holistically.
We work with clients to Identify and prioritise their performance drivers across all of their customer touchpoints. Optimising performance across the whole buyer journey.
Advertising v Organic ROI
One of the questions all markers get asked is should a brand focus on paid advertising or use an always on-organic approach.
Buying ad space, can – for a price – buy more leads, quicker, and so can provide a relatively instant ROI result. Using an organic approach, can take longer, as brands need time to build up an authority score on Google but the quality of leads, for a potentially smaller investment can be better.
In terms of investment for generating sales, brands need to understand that ad sales are only one element required.
We try not to focus solely on trying to get as many ad sales as possible because that way brands could actually be paying for leads they would get organically and are therefore cannibalising potential organic sales, when actually the two streams should work in tandem.
Investment versus sales
But simple investment doesn’t equal greater sales. There are a number of different tactics that brands should use but they need to understand how to optimise their mix of ads, organic, creative, copy, PR and email marketing to generate the best results.
The impact of marginal gains on ROI
As an omni-channel marketing agency, we are always on the lookout for marginal gains; Striving for 1% improvements in either results or savings, which add up to significant improvements in ROI.
Marginal gains was a methodology Sir Dave Brailsford applied so successfully in his time as British Cycling performance director before he moved to Team Sky.
His philosophy is best encapsulated by this quote:
“If you broke down everything you could think of that goes into riding a bike, and then improved it by one percent, you will get a significant increase when you put them all together.”
What Sir Dave referred to as ‘Marginal Gains’, we call ‘Optimisation’ and all our clients are already following this approach.
Our data-driven approach can lead, for example, to better ecommerce performance through either reducing customer acquisition costs or improving the conversion rate of browsers to buyers.
While an optimised, direct response, email strategy, whether that is for monthly newsletters, competitions or one-off e-shots is key to improving open rates and click-throughs.
Understanding the impact of changing social media algorithms and trends is key for optimisation on these platforms. Knowing the best content and times to post on platforms that have evolved from a place to chat to friends, to a place to engage with favourite brands to a place to now enjoy a seamless ‘see it, buy it’ in app journey.
Implementing this level of optimisation – to achieve marginal gains- throughout the customer journey will improve the temperature of the leads that land on various ecommerce platforms meaning the final step can be to improve conversion rate optimisation.
Return on Marketing Objective
Perhaps a more accurate way to measure marketing efforts and effectiveness is to focus on the specific objectives that each activity – or channel- is trying to achieve. In this way we can still focus on sales or revenue as the end goal but also appreciate, measure and optimise all the activities that combine to lead to this outcome.
Using Experts to Deliver Marketing ROI
Using the marginal gains analogy once again, when Sir Bradley Wiggins won gold at the Beijing Olympics, it wasn’t just because of the bike, the helmet, the track or the rider, but a combination of all of these things, working together.
Achieving Real Marketing ROI Requires a Similar Approach
Across the myriad of channels and platforms, generating real ROI requires experts in their respective disciplines working together to achieve optimal returns. No one person could – or should – claim to be an expert in every channel.
At Market Rocket we provide industry benchmarks to help manage clients expectations on returns, evaluate the competition and then optimise a set of omni-channel marketing campaigns with the right KPIs to improve performance. This shouldn’t just ever be about overall conversion rate since that has many limitations. Instead, we encourage clients to look at overall performance measures such as revenue or goal value per visit by segment or step of the journey from browser to buyer.
If you would like to have a chat about any of the topics covered here or would simply like to know more about us please do get in touch.