Every business leader, CEO, CFO, COO generally feels the same sense of blindness when it comes to digital marketing, how do we measure the return on our investment?
The answer is relatively simple, without the right tools and platforms to deliver you that all-important data, there is no way to understand how your campaigns are working for (or against) your objectives.
The good news is that you can put into place effective measurement that makes sure your marketing dollar is working for you, holds those in charge of campaigns to account and allows you to make smarter decisions for your future strategies.
The challenge of measuring your marketing effectiveness
The problem with trying to predict and forecast your marketing campaigns’ effectiveness is that it takes an abundance of competitor analysis and data collection to understand how your particular niche is performing online.
As an example, you need to know what to measure to get these kinds of insights. Then you need to know how often you need to compare results and set benchmarks.
You will need to deal with extraneous variables that alter these numbers, making it even more challenging to create a data set that you can use as your ‘go-to’ for setting future KPIs and ROI goals.
Despite this, there are some tangible ways you can collect the most crucial data points and use them in a clear-cut formula for measuring ROI.
To do that let’s look at the complexities that you will face in trying to achieve your goal.
Too many fingers in the pie
When there’s a lack of clarity around responsibility and accountability, information ends up ‘contaminated’, with too many people trying to collect and understand what data means.
This contamination then leads to a whole heap of numbers floating around out there with no clarity around source, relevancy or origin.
With so many fingers in the pie that is your data, you will find this nonsensical and effectively useless.
The solution is to allocate the analytics and data collection process to one person or team in your business and let them run with the hard yards as there is no need to have every Tom, Dick and Mary assessing the numbers.
A great example of this is COVID-19.
While campaign effectiveness may have a typical behaviour at any other point in the year, the shifts that the global pandemic has caused means the ‘norm’ for marketing strategies are not so easy to predict.
This is because consumers and web users behave according to the circumstance that they find themselves in, so what may not be the ‘norm’ to us, feels perfectly normal to them.
As a business leader, what this means is that lockdowns, business openings and closures, unexpected dips and huge ebbs and flows has meant that when it comes to forecasting, the new ‘norm’ is unpredictability.
When it comes to this behaviour reflecting the tangibility of your marketing, that’s a tricky game to play. What you can do is make sure you’re keeping yourself (and your teams) up to date with the latest consumer behaviours in your specific niche, most notably their purchasing habits and most prominent pain points up to the minute.
Campaigns require constant revision to reflect these changes and as a business leader you will need to be hyper-aware of having to adjust your campaigns more than ever before – that’s the world we are in right now.
So, how can you factor this unpredictability into your efforts to measure data and analytics?
You need to factor them as they happen, if a change in purchasing behaviour spiked on a particular day, figure out why.
Involve your teams, ensure you have the answers to questions of how outside influences, like a snap lockdown drove change. Use these trends as a way of adjusting to the ‘weather’ of your situation and use it to your advantage.
Define your ROI formula
In order to apply important factors into your calculation, you will need to know exactly what formula to adopt in the first place.
Most campaigns are tracked automatically, but to assess whether your returns are accurate, you’ll need to carefully set up a blanket-fold equation that works for your business.
This is especially the case if you have active content marketing campaigns or public relations in the mix, all making it harder to pinpoint an exact ROI figure.
According to HubSpot, you’ll need to define a few initial details to create your own equation.
- Leads acquired: that is, how many people turned into a warm lead.
- Customer transformation rate: How many of these leads became a customer?
- Average sales value: This is the average price of your product. When you have frequent sales and discounts that alter your overall pricing, this is very helpful to have on hand.
- Cost of marketing costs or ad spend: How much did that campaign set you back in funds? Think about ad spend and the resources you put into creating that campaign – e.g., staff costs or content production fees.
Once you’ve noted all these down, it translates into a formula that looks something like this:
[((number of leads x lead-to-customer rate x average sales price) – cost or ad spend) ÷ cost or ad spend] x 100.
Not quite yet, you still need to apply any outside influences or assess whether there are too many people contaminating this data to accurately assess whether the figures you’ve come up with are a precise reflection of your marketing model.
Make sure the numbers deal with the outside factors you are facing and remember that if you’re letting too many people make their mark on your data or a global pandemic is changing the way your customers buy, then make the adjustments you need to the data honest.
Following the above will give you an excellent start to creating a solid ROI formulation, especially if you keep it agile enough to shift with the times.
Written by Ryan Jenkins.