If you’re a business owner who finds it difficult to justify further investment into marketing, I can tell you that you aren’t alone. In fact, understanding what return a client can expect from specific marketing activities is something we come across quite regularly.
Sales revenue appears to be more transparent when it comes to attributing results to effort; either you make a sale, or you don’t. For the reasons outlined below, marketing appears to be more of a ‘dark art’ because it contributes to the end result of generating revenue; it’s just that the attribution isn’t so explicit.
In this blog, we look through the typical scenarios as to why calculating ROI from marketing can be difficult (but not impossible!)
1. Knowing what to measure
Let’s put aside the fact that the business wants to generate more sales and increase profit. That’s a given.
Depending on what your business needs, your marketing activity could be anything from raising brand awareness through to upselling additional services or products. This is why it’s key to understand which area of the customer journey needs to be worked on. It will help you to focus on a specific campaign or segment of your targets and to better define success metrics to measure this.
For example, if you know that the conversion rate of leads to sales is satisfactory (i.e. you’re happy with that level of performance) then you’ll want your marketing activity to focus on generating more leads to be converted. Your investment will be the marketing campaign cost of generate those leads, and your return is the projected sales value of those leads, based on current sales conversion rate and current average sales value.
2. Knowing when to measure
Particularly with consumer purchases, the sales journey can be a short timeframe. Business-to-business (B2B) purchases can be longer if they are high in value and have multiple stakeholders and decision makers. The point here is that you may not attribute any return from your marketing activity early in the sales process because of the length of time between that and the actual sale.
But that doesn’t mean the money spent on those early campaigns was wasted or didn’t perform. Quite likely, it contributed to building awareness of your products or services, engaged with a key stakeholder or decision maker, and moved the buyer through the sales process. Which leads nicely on to our next point.
3. Understanding the impact of multiple touch points
As is often said: “The whole is greater than the sum of all parts.” Your buyers are impacted by the messaging they receive, and in today’s world those messages come from all angles! Social media, email, banner ads, TV, print, text, radio – you name it, marketers use it!
Depending on which stage of the sales journey they are at, it’s most likely that your customer will have at least seven touch points with your messaging before buying. This means that only measuring individual activity on its own merits isn’t entirely accurate (or fair).
For example, the third or fourth touch points may not directly generate an enquiry or sale but they build up the association of your brand as a solution to their problem, and contribute to the likelihood of action being taken in due course.
These are just three examples of why measuring ROI from marketing can be difficult, but certainly not impossible. We hope it demonstrates that strategically planning your marketing activity will assist you to get more value from your marketing investments. Marketing strategy doesn’t have to feel overwhelming either – that’s what PP8 are here for.
If you have more questions about marketing ROI and would like to discuss getting more from your marketing spend, then contact Paula for a discovery call.