With an average of 11.3 percent of a B2B organization’s budget allocated to marketing, ensuring a return on investment (ROI) is a constant challenge for marketers. Without a doubt, marketing impacts the bottom line. But are marketers quantifying their contributions to the business in ways that are meaningful and valuable?
Fundamentals and Challenges of ROI
To understand ROI, a good starting place is the basic formula used by marketers and entrepreneurs today:
(sales growth – marketing cost) / (marketing cost) = marketing ROI
Typically, the rule of thumb is a “good ROI” should be at least double the investment cost. For example, if an initiative cost $2,000 and the company’s sales growth was $5,000, the ROI is a rate of 1.5. You can also multiply that number by 100 to see that growth as a percentage—150 percent in this example.
(5,000 – 2,000) / (2,000) = 1.5
X 100 = 150% ROI
The formula is relatively straightforward, but using actual sales produced from a marketing initiative isn’t the only way to assess value. For example, a pay-per-click advertising campaign with a specific promo code has a clear ROI if we define the total number of paid-for clicks as marketing cost and the total number of converted leads from that ad’s promo code as sales growth. However, other marketing initiatives such as blogging, social media outreach, white papers, email campaigns, telemarketing and other forms of outreach may not have such a direct measurement. Sometimes, it can be difficult to determine which initiatives contributed to which results, or how many touch points or engagements culminated to make a sale or keep a customer returning.
Methods to Help Measure ROI
To help measure ROI, consider these suggestions:
- Use analytics tools for regular progress reports. Free programs such as Google Analytics or Facebook Insights can help you measure engagement of content, click-through rate, user demographics and so on. Other analytics programs such as Hubspot Dashboard offer a wide range of options for a fee.
- Approach initiatives with benchmarks in mind. By having clear goals and correlating benchmarks for a project, it’s much easier to quantify success. Before jumping into a project, set specific and measurable goals, and be prepared to adapt as needed. Examples include content page views, social media interactions or shares, email click-throughs or converted leads.
- Use attributive tools and terms where necessary. Similar to our promo code example, it can be helpful to use certain tools or devices to connect leads to specific initiatives. Whether users were referred with a certain code, a network of links, a guest blog or a peer referral, use prompts or surveys when appropriate to help define their path.
- Align sales and marketing teams. When sales and marketing teams are aligned around revenue cycles, initiatives and goals, ROI, productivity and organizational success are likely to improve.
- Compare your outreach initiatives with those of the competition. To capitalize on opportunities, it is helpful to look at what your competitors are doing right or where your firm can fill a need. Research your competitor’s numbers, content or distribution methods, or reach out to peers to determine a way to change the status quo.
Numbers Aren’t Everything
There is no cookie-cutter solution for determining and measuring ROI. Every project will have different variables and elements to consider. The key to tackling ROI is understanding the different factors that go into defining success. Success will always look different from project to project, client to client and even day to day. While ROI is essential for justifying marketing spend, managing budgets and holding marketing departments accountable, numbers aren’t everything. ROI cannot always be determined by a dollar amount. When it comes to marketing ROI, remember that every dollar you spend builds an asset for the future through brand equity, marketplace visibility and customer relationships.
