Econsultancy has just published a new Best Practice Guide, Maximising the ROI of Digital Marketing.
Subscribers can download the guide in full, but I thought I would tease you, reader, by sharing seven questions marketers should ask themselves before they calculate ROI.
Here we go…
1. What is the business case for calculating ROI?
It seems fairly obvious that the point of calculating ROI is to determine the effectiveness of marketing spend. However, this quote from the Maximising ROI report, from Steve Lok, Global Head of Martech at The Economist, illustrates how the business’ motivation may be slightly more nuanced, in this case as part of a commercial reorganisation:
“We’ve expanded our concept of a customer and the return that we get on a customer, taking it beyond digital marketing in subscriptions revenue, and applying it to revenue across the board for The Economist and its multitude of products, from B2B to events, through to small ad moments. …So, the ROI calculation is not only based on the value of a subscription and what we might spend against marketing channels to get that, but also other channels that exist. That might be a micropayment of £1 for an article, for example, or £200 for a subscription or £2,000 for an event ticket. We are taking a very holistic look at what it means to be an Economist customer.”
So, what is the business case for calculating ROI? Knowing this will help when answering the next six questions.
2. What is your frequency of measurement?
Frequency of measurement will be affected by many factors, not least your industry and the product or service you sell (e.g. how long is the consideration period?).
You should ask yourself over what timescale can you control your marketing budget – weekly? monthly? less often? You must determine how frequently you are actually able to take action based on your measurement.
Take care to find a balance between short-term sales and long-term benefits.
3. What is your sales baseline?
What would your sales and profits have been prior to any marketing investment? You may need to look at historical financial data, or conduct A/B testing to try to determine these figures.
4. What are your business goals and KPIs?
Goals, KPIs and tactics exist in a hierarchy:
- Goals represent the core outcomes a business hopes to achieve through its marketing investments.
- KPIs are the key metrics that determine whether goals are being met.
- Marketing tactics are tied to KPIs.
Metrics are not always revenue-based. Steve Lok, Global Head of Martech at The Economist, explains in the Maximising ROI report:
“…softer metrics, such as sentiment and engagement are great ways for us to tell if something is working, and because many of them relate to behavioural and emotional factors, they can change very quickly depending on messaging, tactics, the channel and even the weather. They allow us to have live data points to optimise quickly on a real-time basis, which impacts things like programmatic and machine-led scenarios. Softer metrics can also have longer tail effects on brand and awareness, so we look at them both from a macro and micro level.”
5. How will data be collected?
To put it simply, marketers need to be confident they have a centralised point for data storage, and that measurement from different marketing channels is considered at campaign set-up.
Prior thought to tracking behaviour and eliminating gaps in data is essential. Ian Hyde, Head of Paid Media at Ayima, goes into more detail in the report:
“Ensure that all of your micro-conversion events are tagged up, using Facebook’s custom audience pixel, or by importing goals from analytics into AdWords, which DoubleClick allows you to do, and getting floodlight tags on if using the DoubleClick stack. Also having your analytics set up in a way that allows you to get tangible data out, whether that’s through UTM tracking, auto-tagging, or whatever you are using. And having one dashboard where all your data is housed makes it a lot easier to manage, or you’ll be looking at Excel reports and individual channel data. Once you can trust your data, you can start looking at ROI, and decide on the attribution model that will work best.”
6. Can you ensure data integrity?
Data integrity is critical. You may need to supplement first-party data with modelled or third-party data is critical, for example, to expand the view a marketer of your investment.
7. What macro and micro methodologies will you use?
To look at long-term ROI, marketers need macro methodology. This may be annual analysis that looks at the value of marketing investment as a whole.
Micro methodologies are more a part of a marketer’s day-to-day routine, including techniques such as customer path analysis through the sales funnel. Attribution frameworks can be applied here, such as multi-touch attribution (MTA).
Econsultancy subscribers can now download Maximising the ROI of Digital Marketing: A Best Practice Guide.