The Science of Marketing: Measuring ROI
For some firms, marketing’s contribution to business growth is undervalued and underappreciated. The function is not seen as part of the business, but as overhead, when, in fact, marketing has a direct effect on a firm’s bottom line. Therefore, the pressure to measure return on marketing investment is becoming increasingly important. Why so? Because frankly, marketing spend is an investment—in your firm’s brand, recruiting efforts, lead generation, and more.
In our 2014 Professional Services Marketing Survey, we asked participants “What is the primary purpose of your marketing investment?” Overwhelmingly, the response was “revenue growth.” However, when we asked those same participants if they are currently measuring ROI, almost 85% said “no.” If they are not measuring their return, how do they know if the money they are spending on marketing is even worth it? (To request a copy of the complete survey report, click here.)
Calculating marketing ROI does not have to be a mystery. If tracked, interpreted, and reported effectively, firms would have a better understanding of their marketing investment and efforts. Firms that ask “How do I know if this will work for my firm” or “How do I know if participating in this tradeshow is worth the time and money” are beginning to understand and recognize (as they should) the benefits of calculating marketing ROI.
The first step to understanding the benefits of measuring ROI and how firms can use it to hone their marketing activities is knowing how to properly calculate it. That being said, measurement can be as simple or as complicated as you make it. Don’t measure simply to measure. If you are unsure of what to measure, ask yourself:
- Will this support my marketing plan and ultimately my firm’s business plan?
- Will these metrics be actionable? i.e. will I be able to refine or improve my activities/spend based on this measurement?
If you answer yes to both of these questions, the measurement will be valuable.
The formula for measuring marketing ROI is pretty straightforward: the revenue attributable to marketing, divided by the marketing dollars invested.
While it is beneficial to measure ROI, your firm may want to consider supporting measurements such as Cost per Visitor, Cost per Lead, and Cost per Proposal. Additionally, you might measure your conversion rate or close rate. This information can help your firm decide if the investment in both time and money was worth it. When determining what to measure, always remember the guidelines listed above.
Here are some tips to get you started:
Make measurement a priority: your processes will most likely evolve, but take the time to track, analyze, and report on performance.
Collect actionable metrics and ACT ON THEM: only track what will help you improve.
Learn from your peers: find out what works for them and share your best practices with them.
Be ready to adapt: what you measure may shift over time, so be prepared to evaluate regularly and make sure what you are tracking supports the business plan.
Automate data collection: there are many tools available to help automate information; a CRM, Google Analytics and marketing automation systems are good places to start.
Take time for analysis: it isn’t enough to collect information, you must analyze it, understand it, and use it to improve your efforts.
With the availability of so many different tools, measuring the results of your marketing activities is easier than ever before. Marketers should, and must, track marketing ROI to fully understand the results of their efforts. Use the information collected to better understand your target audience, and use that information to continually improve. The results are endless – higher qualified prospects, more client conversions, educated teams, and well-informed, happier leadership.
To learn more about what to measure and why, click the link for our July webinar recording “The Science of Marketing: how and why you should measure marketing ROI.”
Posted on Wed, July 1, 2015
by Christine Hollinden