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How to Calculate Marketing ROI

Expert advice for marketers on measuring return on investment.

Time is precious when it comes to digital marketing

Here at Digital Qube, we understand that the return on any expenditure of time, money or resource is the holy grail of any business. Investible resources are limited and must be spent wisely, so developing a metric to understand return on investment (ROI) is not only a productive task, but a necessary one. In theory, the formula is a simple one: profit minus cost divided by cost will equal ROI. Though when this otherwise simple formula is applied to marketing, it can get a bit lost in translation.

 

"Many marketers cannot quantitatively prove the impact of their marketing campaigns"

 

The problem is that many marketers cannot quantitatively prove the impact of their marketing campaigns. Why? Because marketing ROI isn’t as simple as money spent vs customers gained. It’s actually rather complex; many marketing tactics actually exist agnostic of campaigns and often the impact of a marketing campaign outlasts the campaign itself. Simply put, while they are undeniably critical, most of today’s marketing tactics are notoriously difficult to measure – content marketing and search engine optimisation (SEO) to name just two. Long-term marketing initiatives require months or even years before their impact can be seen, and because the marketing landscape is now considered 'omnichannel', by focusing the measurement of ROI on specific channels, you might miss the bigger picture.

So it could be time to step away from a cash-centric definition of profit and instead measure ROI with a focus on these three long-term values:

  1. Touch points

  2. Brand awareness

  3. Customer lifetime value

Touch Points

An age-old marketing wisdom states that it takes at least seven touches to convert a cold lead into a sale. While this number might not be true for every single transaction, the general principle conveys an element of truth: there is not one single catalyst that causes a purchase, rather, a number of multiple touch points.

 

"It takes at least seven touches to convert a cold lead into a sale"

 

Being able to measure the cost of each touch point, whether in budget or personnel hours, will give further insight on the buying behaviour of your customers and the efficiency of your sales and marketing tactics.

Brand Awareness

Measuring brand awareness is much more than revenue generated. Brand awareness is indicated by recognition, interaction and engagement with your brand, and is most accurately measured in terms of return site visits, increase in branded search terms, and PR impressions.


The key thing to consider when measuring brand awareness is time. Have you given your campaigns and tactics enough time to mature? SEO campaigns, sponsorships and PR efforts can take at least 6 months before you will see any sign of value.

Customer Lifetime Value

The typical cycle of any business lead follows three key stages: first awareness and engagement, then conversion and purchase, and finally loyalty and advocacy. With that in mind, it becomes glaringly obvious that it is quicker and cheaper to sell to current customers than it is to acquire new ones. In fact, depending on what industry you’re in, gaining a new customer can be anywhere from 5 to 25 times more expensive than retaining an existing one.

 

"Awareness & engagement, conversion & purchase, then finally loyalty & advocacy"

 

The only way to directly measure customer lifetime value is to adopt a closed-loop marketing system: to understand a customer’s first click, last click and everything in between that has led to that purchase. In its simplest form, closed-loop marketing relies on data and insights from a robust CRM system, and is the only way to directly attribute bottom line profit to any marketing campaign.

Understanding the customer lifetime value is central to so many decisions about how you allocate your marketing resources and provides real-time feedback about your business’s campaigns, offers and lead generation.

 

While measuring the return of marketing campaigns is complex, it is possible

 

Our recommendations

While measuring the return of marketing campaigns is complex, it is possible. Here is just a small sample of the tools available to track the impact of your marketing spend:

  1. Google Analytics

  2. SME Rush

  3. BuzzSumo

  4. MarketingCloudF

Each campaign type can be measured in a different way and then combined into a funnel and layered up into a company-wide model, as shown in this illustration:


How to develop a marketing strategy

ROI tools for measuring the exact response of your marketing, such as Google Analytics, SEO keyword traffic analysis tools and pay-per-click (PPC) reports, all enable us to measure exact response rates on our campaigns. These can then be combined with brand metrics such as Brand Lift by Google or Brand Score surveys.


Using our expertise of working with Google, we have created ROI models for our clients which enable them to confidently track the ROI on their marketing. Get in touch for further details. To read more about our KPI and strategy workshops, visit https://www.digital-qube.com/digital-marketing-strategy.


Contact: ceo@digital-qube.com

WhatsApp or phone: +971 58 581 9733


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