Companies invest a lot on marketing communications. In the United States alone, in 2019 businesses spent more than $197 billion on marketing. In B2B companies, marketing grabs an average of 11.5 percent of the total budget. But is all that money well spent? And more fundamentally, does marketing actually work? A marketing ROI analysis can help answer those questions.
Defining Marketing ROI
Marketing ROI measures the return on investment from the amount a company spends on marketing. It can be used to assess the return of a specific marketing program or the effectiveness of a company’s overall marketing efforts.
There are several reasons why marketing professionals need to determine marketing ROI:
- Justify marketing spend. Marketing is a significant expense for most companies, and leaders want to know they are getting their money’s worth.
- Calculate budgets. Marketing ROI helps marketers determine which efforts have a higher return and may justify further investment. It also shows which programs are less successful and may warrant spending cuts or elimination.
- Benchmark the competition. Evaluating competitors’ marketing ROI can help benchmark your company’s performance against others in the industry. While budget figures are not usually public information, published financial statement data can help marketers estimate ROI for competitors.
- Hold themselves accountable. Marketing has many goals and purposes within an organization. Measuring how efficiently it delivers on its objectives keeps everyone accountable and encourages marketers to carefully consider every dollar they spend.
Calculating Marketing ROI Challenges
For B2C marketers who sell physical products, tracking marketing ROI can be as simple as tracking where your online traffic is coming from and translating clicks and purchases into dollars. But that’s not the case for B2B marketers.
For B2B companies, it can be difficult to make a direct connection between marketing activity and revenue. Challenges include the long sales cycle, lack of communication between sales and marketing departments, multiple marketing touchpoints and channels and incomplete or a lack of data. But perhaps the biggest challenge marketers face when considering ROI is the singular focus on revenue as a result of marketing efforts.
Beyond ROI: Additional Metrics to Consider
While ROI is an important measure of a company’s marketing success, there are other non-financial metrics to consider. Some of these include:
- Brand awareness
- Company reputation
- Visibility of thought leaders in the marketplace
- Innovation
- Customer engagement
- Customer retention and churn
- Net Promoter Score
- Website traffic
- New vs. returning customers
- Social media/website engagement
- Referrals
- Newsletter sign ups
- Customer satisfaction and loyalty
- Customer experience
- Social media followers and subscribers
- Social media likes, shares and engagement
- Employee engagement and productivity
- And many more.
While these factors don’t offer an immediate financial return and can be difficult to justify to leadership, they can indirectly boost purchases or customer relationships later on.
More Than Just a Numbers Game
Marketing expenditures hit profit-and-loss statements immediately, but numbers don’t tell the whole story. Every dollar spent on marketing builds your brand visibility, enhancing your competitive edge and strengthening your position in the marketplace. Forward thinking companies recognize that the true measure of ROI is more than a numbers game. Yet, like the elephant in the room, this concept is often overlooked. Business analytics are important and advanced technology makes operations easier than ever before. But in today’s digital environment, the human side of marketing is more important than ever. The intangible value that comes from personally connecting with customers is impossible to measure but the most important outcome of a successful marketing program.
