A lot companies struggle to calculate their marketing ROI, and there is a good reason for that.
Nowadays, the competition in the business world is as fierce as ever in almost every industry. Companies tend to spend more and more resources on marketing activities, hoping to come out ahead and attract more consumers.
However, as marketing budgets increase, it becomes harder to justify or even calculate the ROI of all those marketing investments. Reports show that 82% of executives want to measure their marketing activities, but only one-third of those can even evaluate the effectiveness of each marketing channel or campaign.
On the flip side, technological advancements have made it possible to gather a ton of marketing data, which is both good and bad.
Data can be invaluable for those companies that know how to mine and interpret it correctly, but can become a real nightmare for those who just get lost in countless numbers, not having a clue whats important and whats not for their business: targets, activities or type of marketing collateral to focus on.
The same technological advancements have bred a new type of consumers, which are now dominating the market informed buyers. Today, customers have tons of information available to them thanks to social media, search engines and peer reviews, which makes it even harder for businesses to clearly understand what they need to do and aim their marketing efforts and budgets at specific goals.
This infographic by Monetate clearly shows just how difficult it can be to mine and understand big data. 39% of Marketers think they cant turn data into actionable solutions and around 95% of data within an organization remains untapped.
The confusion mainly arises from the problem that with so much information available, marketers either chase wrong statistics that dont have anything to do with revenue, or simply dont know what to look for. This leads to chaos in the marketing department and results in thousands of dollars spent for the wrong purposes that could have otherwise made a huge difference.
To help you out, here are 5 strategic ways to calculate and maximize marketing ROI, based on your specific business.
Develop a ROI plan
Every business is different. This technically means that even though two similar companies might be selling the same product, their approach, mission, vision and goals vary a lot. Depending on your strong and weak sides, you have to choose a marketing approach that works best for your case and continue to improve it, or tap into new marketing strategies that are related to the strong points of your company and team.
To understand what you need to do, the first step is to build your ROI plan. You need to understand what to measure, when to measure and how to measure it. Establishing a specific process will help make marketing goals more tangible and achievable.
If you dont know where to start, use historical data. Historical data will help you identify key trends and ideas that will pinpoint in the right direction and teach you what criteria is important to track for your particular business.
Once you identify the key trends, make a detailed plan around those. Your plan needs to be broken into small steps, which can be quantified into actual numbers. For example, if you plan to send out marketing emails, use software to track the effectiveness of those emails. Look for open-rate & click-rate metrics and compare those to your industry averages. This will later help you understand whether your messages really hit home.
The essence of your plan should pinpoint the activities you need to perform as well as the metrics you need to keep track of, in order to maximize marketing ROI. Keep in mind that you will be faced with lots of so called vanity metrics that might make your marketing efforts look good at first glance, but in reality wont be affecting your revenue whatsoever. Here is a great example from Pardot, showing the difference between vanity metrics and metrics that actually matter.
Know what to look for
Continuing the point above, your second step is to know exactly what to measure and keep track of. Number of Facebook fans or blog views might sound impressive, but then again, a blog view doesnt mean much if no further action was taken and a Facebook like gives you nothing more than illusive satisfaction. There is little to no tangible revenue involved here.
The thing is vanity metrics are easy to fall for: you look at the number of your social followers go up and you feel good about yourself, you see that more people visit your blog and think that you are on the right track. But, in reality, these metrics can very well be the problem as to why you dont see any real marketing ROI and profit.
What you want to be looking for, are engagement metrics. Engagement metrics are generally those activities that were taken by real users in an attempt to interact with your companys content in some sort of way. Number of blog shares and comments, conversion rates and repeated pageviews are all important engagement metrics.
Now depending on your marketing strategy, you might be focusing on one or another aspect of online marketing. For instance, you could be heavily invested into content marketing (which automatically makes comments and blog shares a top metric to keep track of and strive to improve), could try out involving on affiliate software to grow over Influencers or you could be focusing on improving website conversion rates (in which case, repeated pageviews will definitely have an edge.)
Whenever you are lost trying to figure out whether the data you are looking at represents any value at all, always remember your business goal: does this metric help achieve marketing ROI the way you planned? If the answer is a yes, use the data, if its a no, disregard immediately without any further thought.
Tie marketing and sales together
Lets think for a minute. The marketing department is there to create a solid ground for your salespeople to be able to actually sell your product to potential customers. This basically means that your marketing ROI is closely (if not directly) related to your sales teams activities. This is exactly why its crucial to have your sales and marketing teams aligned and working towards a common goal.
In this article by Chiefmarketer, its discussed how marketing analytics can actually help sales teams close more deals and increase revenue significantly. A great example here is the example of how Trident Marketing a marketing and sales company leveraged marketing data to determine critical customer insight that helped sales teams close more deals. Leveraging their data from order systems, call centers, CRM and search engine results, the company found answers to specific questions like:
1. When to call a customer
2. Which product to offer
3. Which salesman is best suited for each individual case
The data also helped shed some light on customer churn rate. The company successfully predicted the amount of customers that were likely to cancel their contract after 12 months, which directly related to their bottom line and gave them precious time to try and figure out a strategy to decrease the number of those customers.
Just like in the previous point, whenever you get lost in numbers, ask yourself: how will this metric or investment help sales close more deals? If you keep focusing on the correct tasks and data, revenue will flow naturally.
Dont be afraid of testing
Testing different stuff out is one of the best marketing tactics known today. This might sound like a paradox at first glance, since testing technically means spending resources on something that might actually be completely worthless and result in unnecessary profit loss.
In reality though, testing and experimenting is one of the best opportunities to grow your business. The key thing to know about testing that its not only a learning opportunity, but a chance to gather valuable insight and find alternatives that you didnt think about before.
In order to maximize the effectiveness of your experiments, make sure to base your experiments on solid data figures. This will help justify your experimenting investments to a certain degree and improve the learning process.
For example, if you are focusing on improving website conversions and your data tells you that repeated visitors are interested in your pricing page, try experimenting by offering different pricing bundles with benefits or small incentives. Take a group of visitors and implement the bundle approach, then take another group of visitors and implement the incentives approach.
Compare the results of the two experiments and see what you find with a help of advanced reporting. This kind of experimental methods will help keep everything simple, while potentially provide valuable insight into matters you didnt think about before.
In this case study, a software providing company was able to increase their conversions by 300% thanks to testing and experimenting. The testing results combined data that was later used to redesign product feature matrix and everything clicked together nicely. The new design helped visitors understand exactly why the product was good for them and what they would achieve by using it, and actually persuaded customers to select the higher pricing package.
Here is what you need to remember about testing:
1. Set aside a fixed amount of budget for testing and experimenting purposes
2. Always focus on one thing. Keep digging in the same direction until there is nothing more to improve
3. Leave failed tests ASAP. There is no merit in trying to make something work, when it clearly is a mistake
Dont hesitate to make decisions
Data carries another potential problem that many marketers and business owners struggle with: Striving to gather as much data as possible, in order to make decisions that will be as accurate as possible. As a result, decision makers are often faced with the phenomenon called analysis paralysis, which basically prevents them from making any decision whatsoever, out of the hunger for more and more data.
A study conducted by Stanford and Princeton Universities reveal the psychological aspects of data gathering, when people get so obsessed with filling in all the missing gaps, that they simply stop making decisions altogether. This is a dangerous line you dont want to cross.
The truth is that after gathering a certain amount of data, hunting for even more may actually not make any significant impact or, in the worst case scenario, hinder business growth and development.
To effectively counter this issue, try doing the following:
1. Establish clear boundaries that will prevent any further data collection after a certain point (the point will depend on your goal, your previous failed or successful decisions and marketing strategy)
2. Dont make decisions alone: have a team of decision makers that will analyze everything with you and try to make it all work together
3. Make sure that all data reports have a summary at the end that will suggest some sort of action to be taken based on the report itself
Increasing marketing ROI isnt as difficult as it seems to be at first glance. A lot of companies find it challenging because they think they dont have the tools needed to measure and understand the effectiveness of their activities, but those assumptions are based on nothing else than lack of effective actions.
Almost any operating business has a lot of potential data that can be mined, analyzed and used to extract valuable knowledge and insight from. The difficult part is actually determining what matters and what doesnt. Hopefully, after reading this article, data interpretation and marketing analytics will make more sense and click together so that you can find and fill in all the missing links.
There is always a way out, you just need to find the right tools, which will point in the right direction -)