What is marketing ROI? It’s the return on investment (ROI) that marketing quantifies to justify how marketing programs and campaigns generate revenue for the business.
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Bidding for keywords. Commissioning content. Sponsoring events. Putting logos on NASCAR vehicles. Marketers make hundreds of buying decisions as they seek to achieve their objectives. But how can you be sure your investments are truly paying off? And how can you make continual improvements in your investments? If you want to understand how your buying decisions affect your organization’s overall growth and revenue objectives, focus on calculating your marketing ROI.
The Challenges of Calculating Marketing ROI
Calculating marketing ROI seems like it should be easy – especially when you consider that today’s marketers have access to powerful reporting and tracking tools through web analytics, customer relationship management (CRM) systems, and cross-channel marketing analysis. Marketers can use these tools to track the money they spend on marketing programs that generate sales and revenue. How hard could it be to connect the dots?
Unfortunately, it’s sometimes difficult to attribute marketing ROI to any one program or campaign. Here’s why: suppose your organization spends heavily on social media. A specific Tweet brings a prospect to your website (easy to measure via web analytics), where she signs up for your newsletter (easy to measure via a marketing automation system). So far, so good.
But what if the prospect doesn’t end up buying anything from your organization for months? Meanwhile, she visits your organization’s website four times, clicks through on three marketing newsletter articles, downloads information, and also attends an event.
Which of these touches should receive credit for the revenue? Should it be the first touch – the original Tweet? Or should it be the newsletter, which obviously appealed to the prospect because she opened each issue and even clicked through on three articles? Or what about the event, which was the last touch before the prospect finally became a customer?
Using Direct and Indirect Revenue Attribution
Most marketers measure the marketing ROI of programs via either direct or indirect revenue attribution. With direct attribution, all of the revenue from a sale is attributed to only one marketing touch. In the example above, most marketers would credit the last touch before the prospect buys. With indirect attribution, the revenue from the sale is apportioned evenly across all touches.
Marketers should stop choosing direct over indirect attribution and instead use both. In this model, marketers can compare the programs that were most effective at getting prospects to buy with those that were influential across multiple sales. That way marketing ROI becomes a key component of an enterprise revenue performance management strategy.