Measuring marketing effectiveness is one of the most important things a business should be doing — especially in the digital age. Marketing ROI is a critical metric that should be studied within any marketing plan — after all, without it, there’s no way to measure the strength of your efforts.
ROI isn’t just a static measurement to be undertaken at the end of a marketing campaign, though — it’s a dynamic question that you should be thinking about during the beginning, middle and end of your strategic plan. So, what are some questions you should be asking yourself now for marketing ROI later? Here, we’ll go over strategies for how to measure marketing effectiveness, including advertising ROI questions that should be front and center to your strategic plan.
How are you measuring ROI right now?
To begin to understand where you should go, you need to have an idea of where you are coming from. KPIs in the digital age include increased website traffic and changes in social audience. To measure your website traffic, you shouldn’t just be focusing on one number: an increase in general visits is important, but so is an increase in organic search traffic and an increase in direct traffic. Measuring the followers and engagement for each of your social channels is another great way to measure ROI for your digital marketing. Of course, don’t forget about traditional KPIs; things like increases in in-store traffic, lead numbers and sales and revenue increases are still critical things to consider early in the process.
What is your goal for an increase in revenue?
One mistake businesses often make is to set an informal desire to increase results from marketing. Sure, “more traffic” or “more followers” can be good things to consider, but your marketing goals need to be more specific. Goals should be noted in terms of sales or revenue numbers when thinking about how to plan for better marketing. Not only that — you need to think about them now in order to effectively measure ROI later. Have you set specific goals for revenue increases generated via marketing efforts? If not, it’s time to do so.
Should you exempt some forms of media from ROI?
Although marketers may not like to hear this, not all ROI is worth measuring in exactly the same way. A worthy question is whether you should exempt certain media forms at certain times. For example, brand awareness campaigns might be an area where it makes sense to allow some time to pass before you measure impact. You should still measure ROI in this area, but be aware that it might not be immediate. Also, are you paying attention to where your audience is? It’s not necessarily about picking the exact right radio station to advertise, for example: it’s about having the right message delivered the right number of times in the media you are using.
How do you track conversions?
In order to track conversions, you must first define what a conversion is to your business or industry. A conversion can be a “sale, lead, subscription to your e-newsletter, a downloaded coupon, or anything else that requires a specific action,” according to Leslie Poston, senior social media strategist for Flightpath, a New York City-based creative digital marketing agency and author of Social Media Metrics for Dummies (Wiley, 2012). Once defined, you can make a better decision about the best way to keep track of your conversions — free tools like Google Analytics, for example, are a great way to measure conversions for your business.
How much are new leads worth?
Leads are one of the biggest indicators of marketing success — but do you know how much they are worth to you, in an identifiable dollar amount? Defining exactly how much a new lead is worth will help you make decisions such as how much of an investment should be put into refining and optimizing your lead process, which will help you measure ROI in the future.
What is the Lifetime Value of a customer?
Generating a new lead or making a new sale is great — as a singular, one-time metric of success. But what about a customer’s Lifetime Value? Often, advertisers think ROI isn’t high enough to justify continuing a strategy or campaign, but they forget that the Lifetime Value of a customer is worth a lot more than one discrete metric. When measuring ROI, you should be factoring in measurements like how many times your average customer will buy from you and how many people the average customer will refer your business to friends and family.
How much are you willing to spend?
Measuring ROI isn’t very practical if you don’t know how much are you able to spend on marketing in the first place. In order to ensure an accurate ROI measurement in the future, check in on your budget before starting your marketing plan. Ask yourself questions like “Will this be enough, based on the cost of my leads?” and “Will this be enough based on where I want to be to make sure my goals are hit?”
Where do you want to be?
Chuck Mefford, author of Bransformation, has said in order to be a $5 million business, you have to invest in marketing like a $5 million business. To put this in perspective, we meet with companies every day who are grossing $1 million, but set a goal to be much higher. Yet, they continue to spend like a million dollar business. Too often, companies set ambitious marketing goals, but then don’t set themselves up to succeed at those goals. Remember — with marketing, what you put in is what you get out. To be a $5 million business, you should consider spending like one.
What is your deadline?
An open-ended marketing goal is no goal at all. To effectively measure ROI later, you should determine by what date you need to see progress. When do you need the marketing results to pay off to be cost effective for your business? Start thinking about these questions before setting a plan in place to measure your ROI, to have a more accurate view of your marketing results.
Measuring marketing ROI is truly the only way to figure out if your marketing efforts are succeeding — and if not, how to tailor them so that they will. But don’t fall into the trap of thinking ROI is a measurement designed to be taken once, at the end of your marketing plan. Instead, remember that you should be thinking critically about your goals through every step of the marketing process — this will make your ROI measurement that much more meaningful in the future.