How Can You Know if Your Marketing Efforts Are Working?
When measuring the effectiveness of your marketing efforts, most marketers will tell you that the most important metric is the return on investment (ROI). However, calculating ROI often comes with extreme challenges, and ROI alone isn't an indicator of effectiveness overall.
Instead, you'll want to measure the change in ROI, known as the return on marginal investment (ROMI). ROMI measures the impact of spending another marketing dollar on a campaign. This helps determine whether you should invest more in a marketing campaign.
ROI is necessary to figure out ROMI, so we'll explore how you can more effectively calculate ROI and factor this into ROMI to measure marketing performance.
The Challenges with Measuring Marketing ROI
Measuring ROI for marketing campaigns will present specific challenges that you'll need to overcome, including the following:
Attribution Models Require Subjectivity
Attribution modeling entails figuring out which paths people take to convert from prospects into leads and leads into customer.
In the process, you can determine the specific value of each component in the customer journey.
Attribution models can include the last interaction users had with a website, the first interaction, and other touchpoints that track how users move along their journeys.
Choosing a specific model requires a certain level of subjective opinion.
For example, some may want to use linear attribution, which evenly splits the attribution credit among multiple channels in a chain of interactions.
Linear attribution is easy to use and potentially fair, but it may not accurately determine the most effective channels.
In other cases, you may want to use time decay attribution, which considers the interactions closer to the time of purchase to be more valuable than previous interactions. The potential problem with this model is the misplaced labeling of value.
For instance, someone might come across a retargeting ad on a website and make a purchase through it, but this ad may have only served as a last-minute reminder of your brand when other earlier interactions did much more to persuade them to buy from you.
Attribution modeling becomes even more challenging when attributing social media and blog content.
Attributing Leads to Revenue
Not all leads convert into revenue-generating customers. Those that eventually do convert may require months of lead nurturing before they are willing to buy.
This potentially long journey makes it essential to use marketing tools that track the individual's journey from lead to customer. The right tool will help you track the entire journey from initial interaction to the first purchase, however long it takes.
Incorporating Brand Building
Brand awareness can impact your sales success, but it's often tough to attribute brand awareness campaigns to actual sales results. Typically, the metrics you use to measure brand awareness increases are known as "vanity metrics" because they lack an immediate impact on ROI. For instance, impressions and branded searches don't tell you how many people are actually interested in purchasing your offerings.
However, if the goal of your campaign is to increase brand awareness, these numbers will no longer function as "vanity metrics" and can indicate the success of the campaign.
Marketing Metrics Are Determined by Campaign Goals
As mentioned, the definition of "vanity metrics" depends on the goal of your marketing campaign. The critical marketing metrics to track when calculating ROMI depend on the specific marketing channels and campaign goals.
Some metrics, such as customer lifetime value and customer acquisition cost, are always essential.
Additionally, a customer acquisition campaign through email marketing would measure:
- Email open rate
- Click-through rate (CTR)
- Conversion Rate
Lead generation relying on content marketing campaigns may also measure:
- Organic traffic
- Engagement rates/bounce rates
- Form fills
- Gated content downloads
- Marketing Qualified leads (MQLs)
- Sales Qualified leads (SQLs)
- Cost per lead
Measuring Campaign Effectiveness from ROI to ROMI
Many businesses still rely on ROI alone to gauge the effectiveness of their marketing efforts. However, ROMI is actually more effective because of its increased accuracy when measuring results.
This is because ROMI measures "marginal" return instead of an average. While ROI changes depending on spending, ROMI will help determine if you're spending too much or too little in a given area.
If ROMI is zero, this indicates that your spending is sufficient and doesn't require a change in investment. As a result, ROMI can be far more helpful when deciding how to spend your marketing budget.
Choose the Right Marketing Metrics to Measure Your Campaign
By measuring ROI and ROMI together, you'll better determine how well your marketing campaigns perform. The right metrics will go a long way in helping you get the results you want from your efforts as your business continues to grow.
Want a marketing plan with measurable results and a local focus? It all starts with a free marketing strategy consultation with Mid-West Family Eau Claire.