Savvy business owners get into the habit of looking for ROI from everything their company does. The same is probably true of you. At the end of the day, if something costs you more than the value it provides, you are wasting money. But there is no simple solution for gauging ROI, either.
ROI from securities is cut-and-dried. But what about ROI from people?
You wouldn’t justify the expense of an executive assistant based on the revenue they generate. Rather, the ROI is the time they free up so leaders like you can perform instrumental tasks in growing your business. Likewise, certain operational necessities – like electricity – rarely get evaluated in terms of ROI.
At first, marketing might look like any other function: You gauge ROI by looking at revenue versus expense. But is that really the case? Business leaders like you are discovering a straightforward marketing ROI calculation is not as simple as it first appears. What’s more, it may not be the most helpful way to look at marketing’s value.
Here are some of the big reasons why:
1. Marketing and Advertising Are Vastly Different
Marketing and advertising are often nested in the same budgetary column. You might even hear them being used interchangeably from time to time. In truth, however, they are very different from each other – and the difference counts. It’s crucial to unpack the difference before looking for the truth about marketing ROI.
Advertising is usually attributed to an external effort. It’s inextricable from buying a placement either in traditional media, a digital platform, or even a billboard. Marketing, by contrast, focuses on your internal activities. That means marketing and advertising ultimately have completely different strategic roles.
- Advertising mainly reaches those who haven’t entered the “I’m interested” phase of the buyer journey.
- Marketing positions your brand to validate consumer expectations as they research potential solutions.
2. Advertising ROI Is Simple Compared to Marketing ROI
Determining advertising ROI generally comes down to three interrelated factors:
a. Impressions
Impressions are measured in “cost per thousand” (CPM) and represent the opportunity to have an ad in front of a member of your defined audience. Most companies base their budget around a defined CPM, balancing their expected cost of customer acquisition and average value of a lead or customer.
Not every impression converts into revenue – there is a reason why they are usually measured in a batch of one thousand! Even so, the marketing team and business leadership should gather around the table to make a firm determination about how much value to attribute to someone seeing your brand regularly.
b. Clicks
It’s just as important to determine the value of a click as an impression. A click represents someone engaging with your ad, clicking on it and arriving on your digital property. Typically, that would be a landing page on a website. This is a significant step in the buyer journey and represents a new phase in the relationship.
Evaluating your cost per click (CPC) and understanding how many clicks it takes on average to convert to a sale gives you clarity on your advertising investment. High cost per click often points to ads that aren’t completely optimized for the platform they are on, while low sales conversion suggests a low quality landing experience.
c. Leads
The simplest form of advertising ROI is measured in leads generated as a result of your advertising efforts. Still, a deeper discussion can be had on the conversion rate of your advertising-generated leads. Even if you get 100 leads from advertising, they offer you no opportunities if none of them become customers.
3. Marketing ROI Takes a Holistic Approach
Judging marketing ROI is more complex because marketing activities and deliverables are deeply integrated into every aspect of a healthy brand. Here are a few things to consider as you gauge your company’s marketing ROI:
a. Your Brand
Your brand is the essence of your business. It’s what makes your website, digital channel, printed materials, and other content cohesive and impactful for your intended audience. Anywhere your company has a presence, it must be represented by your brand. That’s why brand consistency is crucial to success.
Just think about this …
Have you ever had a situation where you tried to find more information on a company you were going to do business with, but what you found derailed the positive impression you had of them? Maybe you found their Facebook page crowded with irrelevant posts, or a slow, outdated website.
Or maybe you couldn’t find them at all.
Any situation like this is a failure of branding.
b. Sales Integration
Your sales team may be the best in the world, but they need the right resources and support to maintain their confidence in the day-to-day battle to get your message in front of customers. Marketing support enhances a team’s ability to boost your conversion rates by ensuring they can represent your brand to the utmost.
Superior integration between your marketing and sales teams means they can work together to meet even your most aggressive growth projections. When sales teams have the advantage of the content and customer insight that only come from the marketing perspective, they can spend less time researching and more time selling.
c. Referrals
Many businesses like yours have built a reputation by consistently delivering superior quality in their products and services. By maintaining and deepening your relationships with happy customers, you can capture referral business – elevating the life-long value each relationship represents.
Your marketing channels have a vital role to play in the natural development of this value. Referral business is inherently social. The easier it is for customers to share their positive experiences, the more referrals you can achieve. Your marketing channels are instrumental for helping your customers stay connected!
d. Helping Advertising
In today’s complex media landscape, advertising simply doesn’t stand on its own. For advertising to add value to your business, it needs complete marketing support. The more you invest in marketing prior to advertising, the more effective your ads will be. That’s true at launch and for the duration of your ad campaigns.
Inconsistent marketing often causes advertising to fall flat. If your ads can convince someone to take the next step, that next step must validate the feelings the prospect had coming in. That validation is driven by a great experience with marketing content. Every marketing investment has a knock-on effect in ad performance.
When All Your Pieces Are in Place, Marketing ROI Becomes Simpler
Marketing ROI can appear complex because it is the end result of many moving parts. Many small businesses try to gauge marketing ROI without many – or even any – of those pieces in place. Once your marketing has been systematized, marketing ROI becomes a much simpler equation.
Business leaders often find the fastest way to achieve their objectives and clarify marketing ROI is through a strategic consulting engagement with a fractional CMO. Contact Andrew & West to learn more and begin.
