Understanding Return on Investment for Marketing Campaigns
Sometimes I feel like I live in a world of metrics. If you create and run marketing campaigns for your business, you probably do too.
As Chronogram Media’s sponsored content editor, I’m constantly engaging with metrics like page views, link clicks, and time on page. They’re important benchmarks that I use to measure the impact of the sponsored articles we create with our advertising partners. Your own metrics might be those such as monthly sales or cost of customer acquisition.
In today’s data-obsessed land of marketing, advertising, and sales, there are dozens of metrics that you can use to measure the success of your campaigns. And one of the most popular (and misunderstood) metrics of them all is return on investment (ROI).
Why Calculate Marketing ROI?
For small businesses, calculating marketing ROI can seem like a silver bullet. It’s a single, all-encompassing metric that can seemingly help you answer many important questions, such as: “Was this marketing campaign worth it?” “Should I change my ad creative?” “What channels deliver the best results?” or most alluringly, “Can I spend my time or money smarter in the future?”
But like all metrics, the way that you measure and interpret your marketing ROI is often more important than the number itself.
That’s because clearly defining your campaign’s goals and the time it realistically takes to achieve them is the real meat and potatoes of calculating marketing ROI.
Want to learn more? We’ve put together a few tips that will help you interpret your Chronogram Media campaign results and make better, more informed marketing decisions going forward.
How to Calculate Marketing ROI
The goal of calculating marketing ROI from a financial perspective is to figure out how much money you’re making by investing in various marketing activities.
Since ROI used to justify marketing budgets, create benchmarks for future spend and campaign performance, and to identify ways you can iterate on your marketing campaigns in the future, it’s important to understand what goes into the calculation in the first place.
At its simplest, to calculate your marketing ROI as a percentage, you take your profit minus your investment in marketing, divided by that same investment in marketing. (For example, If I made $100 in profit during one month and spent $50 on marketing in that same month, my marketing ROI would be 100 percent since I doubled my investment.)
While it seems easy on the surface, deciding how much marketing investment you attribute to those profits and when can be much more challenging. More on that below.
The Challenges of Calculating Marketing ROI
Today’s multichannel marketing and advertising campaigns are a hive of activities buzzing all at once. At Chronogram Media, our clients’ campaigns incorporate everything from print ads in Chronogram, Upstate House, Explore, and Rural Intelligence to digital banners on our publications’ websites, sponsorships in our email newsletters, social media posts, sponsored articles, extended audience targeting services, and more.
Because marketing campaigns often include multiple placements on several different print and digital channels at the same time, it can sometimes be tricky to attribute success of the overall campaign to any one placement or to say that one activity wasn’t effective.
For example, your campaign may include several issues of print advertisements, digital banner ads, social media posts, and a sponsored print article in Chronogram. Shortly after you began the campaign you got a bump in new sales. It’s not so easy to assign those sales to any of those specific marketing activities unless you ask the customer directly how they found your business. Even then, they might not have realized how many of your marketing campaign touch points they’ve already come into contact with by the time they actually visit your website or brick-and-mortar store to make a purchase.
Or, say that you see in your campaign results that people clicked on your banner ads or your social media posts, but that didn’t generate a sale or other action after they visited your website. It can also be hard to say that those marketing activities weren’t effective because of several key factors, such as what your goal for your marketing and your call to action was and the length of time those goals may take to translate into a sale.
How Your Campaign Goals Factor into Marketing ROI
To measure the impact of your business’s marketing activities effectively, it’s important to clearly define and understand the goals of your campaign. A campaign focused on general brand awareness will have very different metrics and an entirely different timescale than one focused on short-term event promotion or driving traffic to your big annual sale.
Before you embark on any new campaign, it’s important to establish specific goals that correlate with your chosen marketing activities. This will better help you define how you’re measuring success.
Wanting to generate new customers and additional revenue is something that every business wants their marketing campaigns to achieve. If those are your only goals however, you’re not putting yourself in the best position to measure the outcomes of a nuanced multichannel marketing campaign. (Other important goals for any small business may include improving brand awareness, increasing your digital marketing presence, reinforcing brand loyalty with existing customers, and establishing your business as a thought leader in your industry.)
Marketing campaigns can also do more than just deliver or not deliver on your goals. Marketing is something that businesses do almost all year long. You’ll pretty much always have some budget assigned to marketing, so there’s no need to treat it like a zero-sum game. Your marketing campaigns can give you tons of insight about your current and potential customers’ behavior, such as what demographics you should target in the future to where in the sales funnel customers might be falling off.
If you’re willing to simply learn and adapt your future activities based on the insight you gain from your campaigns, you’ll be working toward a better marketing ROI no matter what.
How to Factor Time into Marketing ROI
In a perfect world, one ad would be all it takes to convert a reader into your longtime customer, but today’s marketing and advertising landscape is filled with other businesses competing for that same person’s attention and money. Since we’re used to seeing advertisements all the time almost everywhere we go and most of us have a limited budget to use for new purchases, it takes time to generate significant sales from your advertising.
When calculating your marketing ROI, that’s why it’s best to wait to measure results until several months after your campaign ends. Trying to measure ROI a week or month after your marketing campaign begins running isn’t long enough to understand the cumulative impact of all the parts of your campaign or even the results of a single activity.
At Chronogram Media, we often tell our clients that the ROI of some campaigns might not show up for six to eight months after a campaign ends. When you’re calculating potential profit from marketing activities, it’s important to know that short-term results will only ever tell one part of the ROI story.
No what your marketing campaign looks like, understanding its results is key to calculating ROI in a way that fully accounts for your business’s goals and future needs. Want to learn more about how to craft a smart marketing campaign for the months ahead that has clear goals and a defined path to success? Get in touch with our team of media specialists today.