Five steps to measuring ROI

Five steps to measuring ROI

There are many reasons for marketers to be interested in return on investment (ROI). As Peter Andrews, lecturer in marketing at the University of Hull, puts it: “Boards with experienced marketers are proven to deliver better value, but a recent survey highlighted that fewer than five per cent of top-level boards have a member with managerial-level marketing experience.

Andrews suggests that sometimes what keeps marketing shut out of the boardroom is that for decades it hasn’t argued its worth in ROI.

“As a result,” he says, “marketing is seen as a cost, rather than an investment, particularly when compared to other business functions. ROI should be integral to every marketing plan. It is as important as understanding your target audience and developing brand positioning.”

Here are five ways you can get a clearer view of your marketing ROI:

1) Review key metrics frequently

“In any given quarter or year, the needs and demands of the business may change,” says John Webb, director of marketing EMEA at IT firm Spiceworks. “We often see marketers measuring and communicating a predefined set of metrics regardless of the business objectives. I think we, as marketers, need to constantly re-evaluate how we’re measuring the effectiveness of our programmes.”

2) Recognise broader impact

Jane Christian, head of business science at MediaCom, believes that very often marketers fail to get a full enough view of the effectiveness of their communications. She explains: “Effectiveness is often measured against sales, but if a campaign helps to improve customer retention then this should be measured too. Was it just the product at the centre of the communications that saw a sales uplift? Or was there a halo effect across other products within the business?”

“A second common mistake is to focus solely on the short-term impact of communications. This often happens as it’s the easiest part of ROI to measure. At MediaCom, we typically see that half of advertising’s effect happens in the longer term, up to two years post-campaign. Without understanding which campaign messages and communications channels work best for longer-term business growth, strategies are biased to drive only short-term results.”

3) Beware of digital “measurability”

Digital was meant to transform marketers’ ability to understand ROI but, in reality, many are finding it simply adds to the confusion. Joe Wade, MD at Don’t Panic, says: “ROI in the digital space is a total mess. Marketers drawing the comforting conclusion that their money was well spent by looking at even the more respectable measures – like YouTube or Facebook views – may be making a major mistake. Many ‘views’ are generated by bots and they give no indication of how long a user viewed for. In terms of actual digital engagement on the big platforms, it is shares, comments and likes that are much safer measures than views.”

4) Understand absolute value

ROI can sometimes be a bit of a red herring, according to Christian at MediaCom. She explains: “ROI is often quoted as an efficiency ratio of investment versus return, with 1 or £1, being breakeven. Our view is that it’s the total profit generated that’s the most important thing. A brand may deliver a big ROI figure but based on a tiny budget. It’s more important to focus on areas where a large investment can achieve a more modest ROI, as the total profit generated by the latter will be bigger.”

5) Know when to stop

Finally, while gaining a clear, honest and properly nuanced understanding of ROI is important, so is knowing when to stop and to look instead towards creativity. As Simon Ward, CEO and founder of marketing technology company ITG, concludes: “A common pitfall for marketers is spending too much time chasing unclear metrics, which inevitably comes at the expense of creative investment. Marketing plays a key role in generating leads, but to enable this, marketers must have time to devote to pushing boundaries with creative campaigns.”

Alex Blyth Freelance Journalist CPL
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