Oh, ROI. How many times have you been in a meeting, excitedly sharing your ideas for your company’s next campaign – just to hear your CEO say, “what’s the return on marketing investment here?” This is a very important metric to track, but can be difficult to determine how to track it correctly. Measuring ROI is not always a cut and dried process. It can take many forms, vary in accuracy and be a bit of a pain to figure out. But, it is nonetheless a crucial part of every smart and strategic marketing department.
If you’re in the position of trying to figure out how healthy your marketing ROI is, here are a few things to keep in mind about how to calculate ROI.
Why spend time measuring ROI?
We probably don’t have to convince you that knowing how much money you’re making from your marketing efforts is necessary to understanding your strengths and weaknesses, and ultimately being more effective.
But here are a few more reasons to keep track of this, including:
Being able to justify what you’re spending, and why you might need more budget.
Giving you concrete answers about where you should spend more – or less.
Keeping yourself and your team accountable to results.
Shades of ROI
As you might’ve realized through trial and error, not all ways of measuring ROI are created equal. These calculations can range from incredibly simple (but then most likely not as accurate) to extremely complex (and probably more accurate, but difficult to perform). Here are a few common ways to figure out your returns on your marketing investments.
Educated guess/rough calculation. We don’t recommend this one, but it’s very commonly used. This is basically where you look at a marketing initiative, like a tradeshow, and add all of the costs associated with it. Then you look at how much you’ve gotten in sales as a direct result, and determine if the sales outweighed the costs. This gives you a rough idea of how your marketing efforts are performing, and is better than nothing, but it still falls extremely short of telling the whole story.
Basic formula. Another idea for how to calculate ROI is by using the equation below (found here on the Harvard Business Review site), that will tell you a bit more than the method described above.
This calculation gets you to an actual number, so you can at least compare apples to apples going forward. For example, “Our Facebook ads are giving us seven percent ROI, while our print advertising yields four percent.”
First touch/last touch calculation. But of course you can get a lot more complicated than the calculation above. In that formula, you’re assuming that a single marketing event was 100 percent responsible for causing a customer to make a purchase – and we know that’s rarely the case. Instead, it’s more likely that a customer interacted with your company several times before deciding to buy.
So in order to get closer to the real ROI of your efforts, you have to take into account all of these touchpoints, and try to figure out which among them held the most influence (or if they all contributed equally). Here’s a great resource from Marketo that explains a few ways of doing this. This method gets tricky, but it’s a solid way to really dig into what’s worth your time.
Tech as your ally
Depending on what CRM and marketing automation system you use, you might already have attribution and ROI tools at your fingertips – or you might need to supplement with an integration or some new tech altogether.
For instance, if you have HubSpot, you can create attribution reports which will help you land on accurate ROI. There are also platforms like Bizible, which were created entirely to deliver attribution insights, which again will take your ROI calculators to new heights. But the right software tools for you will vary based on whether you’re B2C or B2B, and your existing tech stack. Check out G2 Crowd to take a look at what’s available, and what might suit your particular needs best.
Calculating ROI in the right way is never an easy process – and if it is, it’s probably not giving you the most in-depth, accurate look at what’s really moving the needle in your marketing initiatives – but it’s necessary and worthwhile. To learn more, or talk about how we can partner with you to help you determine whether your ROI is healthy or not, please contact us anytime.