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Marketing Analytics: The Value of Measurable ROI

12 April, 2021
Niklas Karlsson

It’s essential to understand what marketing ROI is if you’re in the business of scaling your brand. Companies that refrain from measuring their marketing ROI are throwing caution to the wind when it comes to their marketing efforts. Our take is that it’s one of the most valuable calculations within the field of marketing, so let’s take a look at what marketing ROI is and why we believe in its value.

What is Marketing ROI?

Running a fully-fledged marketing campaign can be challenging and exciting, but what if all your efforts don’t actually help the company grow? Evaluating the performance and impact of a campaign is incredibly important precisely because it helps you determine whether the investments in your marketing efforts bring added value to your brand.

Ask yourself: for X amount that you spend on marketing, how much are you generating back in terms of profit and revenue growth? 

Marketing Return on Investment (ROI) refers to the practice of asking this question in order to understand and measure the impact of a company’s marketing initiatives against their profit and revenue growth. 

By measuring marketing ROI, brands can determine whether a marketing campaign is effective or ineffective with regards to driving revenue. And since marketing’s primary purpose is often to drive sales, it’s vital to learn as much as you can about your marketing costs and their yield. 

The insights gathered from this practice is generally used to justify marketing spend and budget allocation for ongoing campaigns and initiatives as well as the future of marketing. The value of marketing ROI thereby lies in its ability to help marketers and C-suites make strategic business decisions that are insight-driven. 

Why is Marketing ROI Valuable?

Marketing ROI’s true value is its ability to optimise marketing efforts. The insights drawn from measuring and understanding one’s marketing ROI are used to shape the marketing investment choices a business makes. 

Calculating the ROI of a company’s marketing efforts enables marketers and analysts to justify current marketing spend, while also positing where financial resources should be allocated going forward. If a marketer is able to accurately measure and understand how their marketing ROI is impacting revenue, then they’ll be able to validate marketing investment choices at an executive level. 

Distributing the marketing budget correctly is a daunting task. In today’s growing digital landscape alone, you’ll find a plethora of potential marketing initiatives you could mix and match. Combining offline and online marketing efforts is a viable option too. But with so many possible courses of action, how do you ensure you’re funding the right projects? Let’s take a look at an example: 

If your paid ambassador programme generates more leads and conversions than your email marketing campaign, you should rather allocate more financial resources to the ambassador programme. This doesn’t imply that one shouldn’t invest in campaigns that aren’t performing well. In fact, some campaigns may take longer to reap greater leads and conversions than others. That’s why it’s important to measure and understand the impact of individual marketing efforts against revenue growth. This is where evaluating the success of one campaign over another steps in.

Analysing your marketing ROI sets a precedent for what an effective marketing campaign looks like for your brand. The results from this analysis helps you to make sense of which of your marketing efforts were successful, so you have a core idea of what campaigns could continue to be effective in the future. These insights are useful when looking to adjust one’s marketing efforts, as well as forecasting revenue growth from particular future campaigns.  

Marketing ROI Evolves 

Similar to the nature of our ever-evolving world, marketing ROI also constantly evolves. It’s not just a quick calculation that you can process to gain an instant outcome. Several varying metrics that bear on the performance of your business should be accounted for. This is why so many brands struggle to accurately measure and fully grasp  understanding marketing ROI .

Since marketing ROI is an ever-evolving number, we suggest you set a time frame in which you’d like to measure marketing spend against revenue. You can decide what would be more valuable for you right now: measuring ROI over a short-term period such as a month, or measuring ROI over a long-term period such as a year or two. 

Measuring ROI over a long-term period, for example, will help you better understand how some marketing channels take a longer amount of time to bring in conversions and sales than others. These channels sometimes prove that their impact on revenue growth is stronger than channels that bring in new conversions and sales within a shorter time frame. Understanding the difference here is key to making decisions about what marketing efforts you ultimately decide to invest in. Ideally, you’d want your business to continue to grow over time, so although short-term ROI indicates what’s working now, long-term ROI allows you to see what will attain even more revenue in the future. 

Moreover, individual companies should also decide what constitutes their particular marketing ROI. There are numerous variables you could factor into the equation such as gross revenue, return customers, item prices, or net revenue. But which of these numbers are more important to consider when it comes to examining your marketing efforts? And what about evolving variables like market trends, consumer habits and pandemics that are outside of your control? 

Our recommendation is to calculate your ROI according to what your business goals are. If you’d like to increase your marketing budget, for example, but you don’t want to necessarily increase the amount of time spent on a particular marketing channel, then you may want to redirect your additional funds towards an effective marketing channel that is less time-consuming.

If your business goal is to amplify brand awareness, for instance, you should factor variables such as social impressions, unique visitors, or new customers into your marketing ROI. By measuring your ROI with these variables in mind, you’ll learn what marketing channels are performing well according to brand awareness amplification and not necessarily revenue growth. This will enable you to make a valuable call on where to invest your budget depending on what business goals you’d like to achieve. 

Marketing ROI may seem complicated at first, but with the right tools you’ll be able to measure and understand your ROI in newfounds ways that will bring your business added value.

The Data You Can’t Measure

Most marketers use multi-touch attribution as their primary marketing measurement technique. This allows companies to credit certain marketing channels, content, or activities with conversion leads and sales, depending on what they’d like to pay attention to. 

Yet, at the same time, many vendors like Apple and Google are starting to decrease the ability for brands to access and use third-party cookies, which will make multi-touch attribution (MTA) less effective over time. 

Although this shift in access may present some challenges, it’s not the only challenge that MTA presents. Several marketing analytics tools and tactics successfully utilise MTA capabilities to draw insights, but there are also an abundant number of things that MTA misses. This includes marketing milestones and data that you can’t measure, such as organic word-of-mouth referrals outside of your marketing channels, social impressions without any clicks, and so much more.  

If touch points like these aren’t measurable then MTA software won’t recommend you continue investing in the marketing efforts that facilitated those touch points in the first place. The performance of podcast ads, for example, are quite tricky to measure, so MTA software won’t necessarily recommend that you try this form of marketing to boost sales — even if it could really benefit your brand. This is something one should be mindful of when calculating marketing ROI.

At Proof Analytics, we go beyond the understanding of where a lead or purchase came from to see the correlation between cause and effects from all marketing activities and investments. This is something that most MTA tools or solutions can’t offer alone.

Our solution, however, will provide you with an expansive outlook on your marketing efforts that considers both the measurable and immeasurable engagement with your brand. By using our Proof BusinessGPS™ platform, coupled with the insights from MTA, you’ll receive a fuller picture of your marketing investments that includes foreseeing any future investments you may make.

Proof Analytics values the evolving insights marketing ROI delivers. Our platform’s use of regression analytics and our ability to automate data management enables us to calculate and visualise future relationships between marketing investments and business performance in real time. 

This empowers our customers to predict, plan, budget, and optimise the combination of their marketing efforts, which enhances marketing ROI.

If you’re interested in learning more about marketing ROI and how our platform can help you bring added value to your business, book a demo with us today. 

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You’ve heard that time is money, right? Just like any investment, we need to know that Marketing was worth it. Not only how much, but how long it took to get the ROI. The longer it takes, the bigger the risk that it won’t happen, and the bigger the return has to be.

Bob-Beauchamps
Bob Beauchamp
Chairman Of The Board Of Directors - BMC Software
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