What is the Best Way to Measure the ROI of your Marketing Initiatives?
Kim Lawton
Founder at Enthuse Marketing Group | Innovative Brand Strategy | Team Development | Management Solutions That Deliver Measurable Results
Marketing initiatives are used to capture your customer’s attention and increase conversions and engagement, thus increasing sales. But because?marketing operations?can be expensive, you need to consistently measure the ROI of your campaigns. Read on to learn how to avoid wasting money and how to enhance your marketing and increase your ROI.
Marketing initiatives are created to help raise brand awareness, capture customers’ attention and increase sales. When developing marketing initiatives, one of the big goals is to see a return on the investment made into marketing, or an ROI.
Marketing initiatives?are strategically designed to be as effective as possible and yield the best possible return. When you launch a marketing campaign, it’s important to keep an eye on it and measure its effectiveness. There are several ways to measure the ROI of your marketing initiatives, most of which involve using a specific formula. If you want to know how to measure the ROI of your marketing efforts, read on to learn the best ways to stay on top of your campaigns.
What is ROI in Marketing?
Evaluating a campaign’s performance, impact, and generated profit is one of the most important components of marketing. Marketing ROI measures the return on investment a company receives from the amount it’s spending on marketing initiatives.
Companies spend a lot of time and money on?marketing operations, so it’s important to ensure that it’s money well spent. Analyzing marketing ROI is the best way to ensure you’re not wasting money and that your campaigns are having the desired impact. Measuring marketing ROI can also be useful when seeing how your company compares with competitors and can generate insights on what is worth spending money on in the future.
Measuring marketing ROI can be done with a?straightforward calculation: (Sales Growth – Marketing Cost) / Marketing Cost = Marketing ROI. Simply subtract the marketing cost from the sales growth and then divide the difference by the marketing cost, and that’s your ROI.
With this calculation, the goal is to end up with a positive number, ideally a high one, which will show that your marketing initiatives were a good investment. In the event you get a negative ROI, that campaign may not be worth the money, and it may be best to pause it and develop a more effective strategy or cut the campaign altogether.
Challenges in Measuring ROI of Marketing Initiatives
While the calculation for measuring marketing ROI is fairly simple, it’s important to be aware of?potential challenges?you could face when measuring the ROI of your marketing initiatives. Some of these challenges include:
#1. Lack of Clarity on What Success Is
There’s no standardization or magic number in the industry that indicates a successful marketing initiative. What your company thinks is an exceptional ROI may not be up to par with another company’s standards.
“There’s no clear definition of what success looks like in the digital marketing industry specifically.”
This can make it challenging when determining what is and isn’t working. Also, with there being so many channels in the digital marketing world, it can be hard to compare the ROI of different campaigns on different channels, as each channel likely has its own unique metrics. You must determine what success looks like for your company to better interpret the numbers you get when calculating ROI.
#2. Difficulty Tracking Data
Given the digital state of?today’s marketing landscape, it’s likely that most of the campaigns you’re tracking will be digital. This means you’ll likely be pulling data from several platforms, from social media channels to your website to purchase histories and email marketing click-through rates.
This can make the process extremely complex. Not only is this a lot of data to gather, but in most cases, each channel has unique metrics and methods for tracking performance. This can make it difficult to get a clear, comprehensive picture of how your campaigns are performing and what the ROI is.
#3. Long-Term Impact vs. Short-Term Gain
In most cases, marketers focus on specific, immediate metrics to gauge how successful their marketing initiatives are. These short-term gains include aspects like click-through rates, social shares, and impressions.
While short-term gains indicate a certain degree of success when measuring marketing ROI, it’s important to also consider long-term impacts like brand awareness, customer relationships, and retention. Unfortunately, these metrics can take months or years to reach their full potential so marketers can see their impact. This is why when?creating a marketing campaign, it’s important to align success metrics with both the overall goal and the duration of the campaign.
Best Practices for Measuring ROI in Marketing
Measuring marketing ROI plays a critical role in a business’s success and helps you make key decisions to improve your marketing efforts and spending for future campaigns. ROI is a vital metric that — when tracked and analyzed — can lead to sales growth and improved customer retention over time, among several other things.
With a knowledge of how to measure marketing ROI and the potential challenges to be aware of, there are also several best practices you can employ when measuring the ROI of your marketing initiatives. Some best practices include:
#1. Set Clear Goals and Objectives
“Like with any marketing initiative, it’s important to establish clear goals and objectives, and measuring marketing ROI is no different.”
From the start, you should determine what you want your marketing initiatives to achieve so you know what you’re looking for when measuring the ROI. For example, maybe you want to see a higher click-through rate on your email marketing campaigns.
You can also measure the?return on marketing objectives?or “ROMO.” This implies that there’s more to pay attention to when measuring the effectiveness of a marketing initiative aside from just ROI, like how much an initiative has changed a customer’s perception of your brand.
#2. Identify and Track Relevant Metrics
Once you determine what you want your marketing initiatives to achieve, you can start identifying the key metrics to measure the initiative’s success. Identifying and tracking relevant metrics to?your marketing goals?positions you to see if the results of your campaigns align with your goals. The metrics you track will vary depending on the marketing initiative you’re looking to analyze.
#3. Use Tech and Tools to Analyze Data
The digital marketing landscape is flooded with data, and when you’re looking to measure marketing ROI, a lot of that?data is important. However, gathering it, organizing it, and analyzing it can be extremely complex and time-consuming. That’s where tech-like marketing automation tools come into play.
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From AI and machine learning algorithms to the various all-in-one solutions currently available on the market, there are several tools you can rely on to make the data analyzing job easier.
#4. Conduct A/B Testing
A/B testing allows you to test two or more versions of marketing content to see which version works best. Whether it’s an ad graphic on social media or a web page layout, A/B testing saves time by testing multiple versions at once so you can determine which makes the biggest impact.
A/B testing can help increase ROI by helping your marketing team learn your customers’ preferences, which can be useful when creating marketing content that helps reduce bounce rates. It also helps marketers make modifications to marketing initiatives in a cost-effective, timely way.
#5. Incorporate Customer Feedback
While data and numbers are important to determine how effective your marketing initiatives are, you should also incorporate customer feedback into your measurements.
“No matter what the initiative is, gauging your customers’ responses and feelings can help you measure marketing ROI for those more complex metrics like brand awareness and customer engagement.”
Understanding your audiences’ wants and needs can help fuel your future marketing strategies, ensuring you’re deploying marketing initiatives that are giving customers what they want, which improves your relationship with them over time.
Examples of Measuring ROI in Marketing Initiatives
Marketing ROI can be measured with practically any marketing initiative so long as you establish your goals and the key metrics you’re looking to evaluate. How you choose to implement measuring marketing ROI in your company will depend on the marketing initiative and what you’re setting out to accomplish. Some marketing initiatives that can benefit from measuring ROI include:
#1. Social Media Campaign
Several factors can influence social media ROI, including money spent on ads, photo and video shoots, and influencer partnerships. Tracking these metrics to determine social media ROI is important to your business because they ensure you’re allocating your budget effectively and pursuing marketing initiatives that work.
There are several examples and case studies of businesses and organizations seeing increases in their marketing ROI by tracking and analyzing metrics and making improvements to their marketing initiatives. One such?social media ROI case study?involves Ashland University. The University was looking to attract more applicants to its Master of Business (MBA) program and partnered with the marketing agency VividFront to help establish the program’s credibility on a much wider scale and streamline the application process.
The agency created responsive websites tailored to the program and students’ interests, providing detailed information and SEO-focused content, as well as built-in application forms that could be easily submitted online. The agency also developed marketing initiatives to drive traffic to the websites by using paid social and search engine marketing to reach prospective students on Google and social platforms like Facebook.
Over one academic year, the marketing initiative generated more than 2,500 leads, which was a nearly 50% increase from the year before. It also drove a 3133.63% ROI, which proves that the campaign created significant value for the university.
#2. Email Marketing Campaign
If you’re looking to generate new leads and cost-effectively engage your current audience, email marketing is likely your best bet. Email marketing ROI is easily scalable, making it a valuable tool to keep in your digital marketing toolbox.
The ROI for email marketing campaigns can vary depending on your business, how big your email list is, how good your content is, and what you’re trying to achieve. For example, your goal may be to nurture more leads or increase your click-through rates and drive traffic to your website.
Email is a great way to contact your audience, as most people check their email every day, sometimes even multiple times a day. This makes it more likely that your email marketing initiatives will reach customers and lead to higher conversion rates than other digital marketing tactics. Every company you encounter likely has some kind of email marketing strategy, and there are several case study examples out there that showcase just how valuable email marketing can be.
Email marketing is effective on its own, but several companies have begun to realize that it becomes more effective when the emails feel more personal and engaging to customers. Adding emojis to email subject lines enhances email marketing strategies by making emails stand out in the crowded landscape that is the email inbox.
In an?email marketing case study launched by Experian, 56% of brands that used emojis in their subject lines saw a higher unique open rate. Emojis can also lead to higher response rates, meaning more opportunities to engage with your customers. Every company with an email marketing strategy doesn’t necessarily use emojis, meaning using them can set you apart from the competition. Plus, emojis can help subject lines fit better on mobile devices.
#3. Content Marketing Campaign
Content marketing includes things like blogs and videos, essentially any type of content. Content marketing can be used to build trust and brand reputation, generate leads, and influence conversion rates while being generally cost-effective.
It can sometimes be difficult to measure how effective a content marketing initiative is.
“With email and social media marketing, customers typically click a link that leads them to a company’s website where they can make a purchase, but with content marketing like blogs and videos, it can be hard to connect conversions to the specific content.”
However, that doesn’t mean content marketing isn’t effective. There are several case studies and examples where countless companies have deployed a successful content marketing initiative that had a significant ROI.
For example, in 2013, Mercedes Benz wanted to target young people and enhance brand awareness across its social media channels ahead of the launch of the Mercedes CLA. To reach young people, Mercedes focused on user-generated content to encourage brand engagement and collaborated with five Instagram photographers. The photographers were asked to take photos of the new car as part of the “Take the Wheel” challenge, and whoever got the most likes on the photos got to keep the car.
All the photographers worked hard to cash in on such a big prize, and the campaign proved to be very successful. In total, the?“Take the Wheel” challenge?generated 87,000,000 organic Instagram impressions and 2,000,000 likes and left Mercedes Benz with 150 new marketing assets thanks to the original photos.
Conclusion
Marketing initiatives can raise brand awareness, capture customers’ attention and increase sales. When developing marketing initiatives, one of the big goals is to see a significant marketing ROI.
Evaluating a campaign’s performance, impact, and generated profit is one of the most important components of marketing. Companies spend a lot of time and money on marketing, so it’s important to ensure that it’s money well spent, and analyzing marketing ROI is the best way to ensure you’re not wasting money and that your campaigns are having the desired impact.
Measuring marketing ROI plays a critical role in a business’s success and can help drive more efficient marketing initiatives in the future. If you’re not already tracking and analyzing your marketing ROI, you could be missing out on key insights that could help improve your strategies and see general growth for your business.