Department-store mogul John Wanamaker famously once said,
“Half the money I spend on advertising is wasted. The trouble is, I don’t know which half.”
Marketing departments are confronted by the same challenge – establishing the connection between marketing spend and profits (i.e. the return on investment or ROI), can be a tough. However, in the age of big data, there’s no excuse for shooting in the dark. Marketing departments today are expected to be accountable – and maximising profitability should be an easy sell for any business.
Social media comes with its own challenges – indeed, 6 out of 10 small businesses report that they cannot measure the ROI of their social activity. However, even if you’re not paying for ads, if someone is spending time creating posts, then you’re spending money.
Whether you’re looking to drive subscriptions, product trials or purchases, the outcomes that you are looking for likely take place once the user has left the social platform. Because of this, tracking, for example via UTM – see Google’s Campaign URL Builder for assistance) is crucial. Furthermore, digging down to the campaign level is invaluable, in order to correctly attribute conversions to the ad or the piece of content that generated them.
It’s also worth keeping in mind that there are several distinct categories of consumers you might interact with via social.
Entirely new customers who aren’t familiar with you (via ads); onboarding customers researching your brand (via your pages); and existing customers who have already made a purchase and then subsequently followed you (via likes, shares, comments and interactions on your pages). This last bucket is particularly valuable and if properly nurtured presents opportunities to drive brand advocacy, upsell and repeat purchases.
However, you also need to put aside vanity metrics. Unless you make money from displaying web pages or driving Facebook impressions, then likes, retweets and pageviews may well be incidental measurables. They are certainly a part of the conversion funnel, but unless revenue can be attributed to demonstrate a concrete ROI then these indicators should not be treated as an end in themselves.
For example, you might find posts that get 1,000 likes on average drive one sale – but if that’s the case, why measure the likes rather than the sale? Equally, you may have a huge social following, but if they never buy anything – and are not likely to – then why do you care?
While mobile is often viewed as a subset of the digital landscape or simply as a channel, based on its unique challenges and capabilities it might better be viewed as its own realm. Are you able to tie mobile users to an overall profile via logins or device fingerprinting?
For retail, do you use locational data, to identify in-store browsing trends and to augment the consumer experience? Following paths like these will give you a far more detailed picture of your customers, allowing you to finetune your calculations of ROI.
Long term and short term
Relative to social, tracking ROI on search and PPC campaigns is relatively simple – ad spend in, and sales or funnel events coming out.
Where this gets trickier is in fields like content marketing. Should the cost and performance of content be attributable to your PPC campaigns or to email marketing or should it stand on its own as a long-term lead generator?
Equally, do you credit a lead to the first point of contact, for example, a sales rep or an email campaign, or to the subsequent steps in the conversion funnel that nurtured the lead and closed the deal? It’s eminently sensible to measure ROI in real time for channels that come with an upfront cost.
Other, bigger-picture strategies may require a much longer timeframe (along with projections to enable decision making in the here and now) and the grouping of whole clusters of activity as cohesive business functions.
Combining real time data and forecasts, channel performance and project ROI. Calculating an overall ROI of your digital marketing activity is no small feat.
Indeed, 43% of marketers say that it is their biggest challenge. However, if you ensure consistency of measurement; that you don’t double count your costs or earnings; and that you don’t compare granular elements like-for-like with macro level projects, then you’re on the right track. Return on investment doesn’t equate to profits – but it’s the best indicator that you have of where your money is being spent effectively.
If you enjoyed this blog, you may be interested in our other articles – Top 5 website design trends that are winning in 2017 and Creating a brand that goes beyond a logo.