The Digital Marketing Hierarchy of Needs

But how do I understand the ROI of my digital marketing efforts?

It's perhaps THE question I get asked more than any other in my consultative work with some of the nation's largest brands. And I'll answer it in two parts, because understanding how to define value and return in marketing is predicated on building on a sound foundation to start with.

Do you mean ROI or do you mean success?

First, it's important to determine whether you're asking about ROI when what you really want to know is how to evaluate whether your programs are successful and justify the investments to other people.

ROI is a single metric, and a trailing indicator (meaning you can't know the value of the return until you've made the investment, so it's backwards-looking). It's calculated like this:

ROI = Net Profit/Total Investment * 100

Ultimately it's expressed as a percentage, positive or negative. And the upshot is a profitability ratio, or how much gain or loss you showed in a financial sense based on a financial investment you made.

But not everything within marketing strategy is easy to express that way.

First, not every marketing action or initiative results in a direct financial return. Sure, ultimately all roads lead to Rome and we're all trying to build programs that drive revenue for our organizations. That's why ROI is a metric best served for looking at overall marketing investment vs. the attributable revenue for those combined efforts over a certain period of time.

But too many marketers (and other leaders for that matter) are asking about ROI for tactical efforts in isolation, like the ROI of a specific whitepaper, or time spent on social media channels. So it's often useful to ask a different question.

If you're looking to understand whether your investments are successful, there is certainly more than one way to define that. Success at a tactical level could mean getting a prospect to take the next step in a journey, ie move from reading a piece of content to signing up for an email list. At a broader campaign level, it might be taking an early stage prospect and moving them through to a true marketing qualified lead based on a series of actions they take. Both of those things have value, and they're indicators of successful marketing programs, but neither can quite show direct monetary value in terms of revenue.

So step one in this process? Substitute "ROI" for "success" and give yourself room to have more than one set of definitions and goals for determining when your marketing programs are performing against more than just financial metrics.

Your Attribution Ability Is Tied To Your Marketing Maturity

The other roadblock I see a lot is companies who desperately want to be able to answer either the hard ROI question or even start getting at some of the less rigorous measures of success and value, but they're not set up for that to start with.

We were all told for so long that OMG DIGITAL MARKETING ALL THIS DATA WE CAN MEASURE IT ALL. And that's just...false. All the data in the world does not a measurement make.

At a fundamental level, every marketing organization has to be built from a strong foundation, and each "tier" of marketing is dependent on the one below it in order to do those things successfully. For example (not exhaustive by any means):

Tier 1: Clear product/market fit, ie a strong product or service offering that fills a need in the market, a defined audience and addressable market.

Tier 2: Well-articulated and strong value proposition supported by messaging that's delivered in the language that customers speak, a basic understanding of the customer journey, and solid base of supporting technology like a website with CMS, a CRM, some basic analytics, and maybe an email service provider (ESP)

Tier 3: Stronger technology stack including automation platforms, experience management and/or ABM, fluid campaign management & execution, data availability and integration across sales and marketing, a healthy paid/earned/owned media mix, etc.

(And all of this assumes the financial and human resources to support it all, plus the operational ability to keep it up, running, and working together).

If you've barely got the stuff in tier 1 but you want the metrics that come out of a sophisticated, multi-touch attribution program more suited to a marketing program at tier 3, that's going to be an uphill climb.

It's not to say that you can't measure success when you've got tier 1 built and you're working on tier 2. It's just that your measurement point of view will have to be a bit more blunt; are you getting good traffic overall? More opt-ins for content? A steady flow of leads? Are those leads converting? Are you spending less for good leads over time? If there's a breakdown somewhere, that's what you have to fix first. And fixing it might mean a return to clearer and better fundamentals rather than just piling on complexity.

Measurement programs have a maturity curve just like marketing strategies overall. You have to crawl before you walk before you run. And it's amazing to want clear, attributable, granular understanding of sophisticated metrics like ROI by channel, influenced revenue per touchpoint, or point of conversion probabilities. But we have to build toward those things; they're not default settings just because we have a mountain of supposed data points at our fingertips.

Much of marketing is about asking the right questions in the first place.

Marketing absolutely can and should be accountable for results. After all, if the business folds because there's no revenue coming in, there will be nothing to market at all.

But marketing is part of an engine, not the sum total of how and why revenue comes into a business. Outstanding marketing programs that end with a disjointed sales process or terrible customer support that drag down conversions or accelerate churn sure aren't going to show a great ROI.

That means the best marketing metrics and measurement programs aren't built in isolation, and they take into account where an organization is in its marketing journey so that we can choose the right metrics to illustrate success, connect the dots between marketing and other revenue drivers, and uncover the areas where we need to improve.

So it's worth it to all of us when we hear but what's the ROI to step back for a minute and ask ourselves what we really want to know, whether we're taking a reasonable look at our own marketing maturity and hierarchy of needs, and how we're building an overall customer experience that supports the results we want.

When we get back to fundamentals and build deliberately from the ground up, we can lay a foundation that gives our marketing strategies - and our companies - the best chance for success, and the ability to prove the impact of our work as we go.