Crystal-clear return on investment (ROI) could also be called “Nirvana.” The place where spending, value and sales all intersect harmoniously in a way that give agencies and clients complete understanding and validation in their marketing efforts. The mistake companies make when interpreting ROI is to tie marketing spending exclusively to sales transactions. There can be so many other variables that come into play when assessing the effectiveness of your marketing investment. Measuring ROI is complex, but achievable, as long as everyone approaches the assessment with a sense of reality.
The truth is that ROI measurement will need to be different for every brand, product, and category. Is it a new product? Is it a mature brand? Is it a product with a long consideration process or an impulse item? Are you trying to create awareness or maintain market share against a slew of new competitors? Is the goal to increase customer satisfaction or loyalty? These are all the types of questions that need to be answered in order to come to an understanding on primary business objectives.
Once the business objective(s) are clear, there can be discussion that leads into measurements for success. All stakeholders need to agree on what is being measured and establish the goals together. If the stakeholders don’t buy into the baseline criteria for measurement, it is difficult (if not impossible) to establish reporting in which everyone will be confident.
Certain areas of marketing communications are easier to monitor than others. For example, a direct marketing campaign can be tailored to have clear, quantitative, reportable sales results. Similarly, quantifying public relations exposure within the media world has also advanced over the years. But, for integrated marketing efforts that leverage multiple media channels, the universe becomes more challenging when it comes to connecting efforts to sales transactions.
Smart marketers realize that there are other “drivers” that can promote sales. There should be ROI goals established within these drivers that have their own unique criteria. The benchmarks for these may not be directly attributed to transactions. For example, if social media is a key influencer in your industry, then a benchmark may be to have 25,000 Facebook fans by the end of the year. If your website is a critical cornerstone of your business, then set goals in your communication plan to drive more visitors and assess your efforts against the robust reporting capability of a Google Analytics. If your goal is increased brand awareness or perception, these are measurable through traditional research as well as various social monitoring tools like Radian6.
At Two Rivers Marketing, we like to hold ourselves accountable for results and enjoy reporting them. Sometimes the results are better than others, but it’s critical to have visibility and agreement on what we’re trying to accomplish for clients. Everyone just needs to realize that ROI in today’s marketplace is much broader than current sales performance.
Managing expectations may be the most difficult, and yet most important, part of the sale of any good or service.
The ROI of having a clean parking lot and decent sign are probably hard to measure, too, but you don’t question spending cash on looking nice to prospective customers. Your marketing dollars should have some of the same expectations.
While you can glean much information on your campaigns, there will always be a degree of the unknown.
Hi Peter – thanks for the input. You are right, and the analogy of the “clean parking lot” is a good one which I have never heard before. Keep up the good work!