Return on investment (ROI) is simple in theory: How much are you spending on your marketing, and how does that expense compare with how much business you are getting in return? You should always get more out of marketing than you’re putting into it. Simple.
From there, however, things get much more complex. As marketers and business leaders, it’s easy to get bogged down in the details – often because this internet age allows us nearly unlimited access to data. We can measure everything and, because of that, there is great pressure to measure everything. Some people find themselves reporting on vanity metrics that don’t matter. Others find themselves bogged down with deliverables or spending hours on tactics that yield few results.
Here are some marketing ROI fundamentals to keep in mind and to keep you focused.
1. Tracking ROI Actually Leads to ROI
HubSpot’s State of Inbound Report showed that marketers who measure their inbound strategies are 17 times more likely to see the same or greater ROI over the previous year. The data is clear: tracking ROI is critical to your marketing success.
Like many things in content marketing, it is better to make some effort rather than none. If you are not critically measuring your marketing ROI, start with an initial step, then add another. Many small steps can add up to a major shift.
Commit to tracking something this quarter. Pick one metric or five. Just start.
2. ROI is Different Than KPI
With so much data available and so much pressure to deliver data, many marketers face confusion between ROI and KPIs. They’re fundamentally different but related. Return on investment tracks how much revenue is being generated compared with how much effort is being expended. KPIs – key performance indicators – are agreed-upon ways of measuring certain business objectives.
If you have a goal of 5,000 website visits per month by next year, for example, that’s a KPI. So is a goal of X number of Facebook engagements per post, or X number of blog subscribers per month. They can help you evaluate (and report on) whether you were successful in achieving certain goals. But KPIs are not the complete picture, the way ROI is. ROI is a number that gets at the essential question: Is it all worth it?
3. Closed-Loop Reporting Is Your Friend
To be truly effective as a marketer, you need access to data. You need closed-loop reporting – accurate data on which sales were made or which leads were closed. To get an accurate picture of ROI, start by acquiring the data from your sales team or CRM. From there, you’ll be able to determine how much revenue is being generated.
This process is not always simple. You’re likely offering various products at different price points. You might even be selling services, with returns measured in retainers or hourly rates spread out over time. In those cases, look for a reasonable number. Your team may want to calculate an average customer value and measure successes in terms of well-qualified leads.
4. Track Every Part of the Investment
After you know how much revenue you’re making, you’ll need to know what it took to get there. There are many ways to attribute a lead or purchase to a specific piece of content. Most website visitors will interact with multiple pages or pieces of content before a purchase. Ultimately, what is most important is understanding the original source of that list and what assists were made along the road to a purchase.
You’ll also need to have a general understanding of the costs that went into the marketing efforts you credited with the sale. You might consider the dollar value of the time it took to write that blog post, for example, or the money you invested in pay-per-click strategies or paid social to get someone to click.
5. The Data Means Nothing if You Don’t Do Anything With It
Have you ever heard of “paralysis by analysis?” It’s the state of over-analyzing every piece of data to the extent that you cannot take effective action, and it’s something that can happen to marketers who lose sight of ROI by focusing too much on KPIs. Don’t let it happen to you.
One of the best ways to break free is to come to the data with questions – instead of just reporting on the data and making assumptions. Ask questions like “where did we see the greatest return on our investment,” or “what kind of content should we create more of,” or “what did our biggest customers have in common?”
From there, take action. Use your newfound ROI knowledge to challenge assumptions and work more effectively. Use it to stay focused on strategies that are right for your business, ones that yield the greatest returns.