There is an old advertising adage that says “I know that half of my advertising is working, but the problem is that I don’t know which half.” Wouldn’t it be nice if the marketing communications business was as black and white as the stock market? You spend a dollar on a stock and sell it off at $1.25. Pretty clear return on investment, huh?

ROI word on the green enter keyboard Unfortunately, in the world of marketing and advertising, things aren’t so clear. As marketers, we need to establish our own return on investment (ROI) parameters based on a whole host of unique business scenarios. There is no silver bullet or one-size-fits-all answer.

Measurability and metrics availability are continuously improving. We can track and measure marketing efforts more effectively today than ever before. There are companies out there (particularly in the e-commerce space) that have successfully closed the sales loop to the point that they actually have a fairly accurate ROI. However, there are many companies that still struggle to quantify their marketing efforts in a meaningful way.

ROI measurement is all about availability of data.

Ideally, every campaign and every marketing dollar could be tracked and quantified to provide absolute clarity on which tactics provide the highest ROI. The truth is that many companies do not have access to the appropriate level of data to directly correlate marketing efforts and sales. Take a look at an example of a company that has a dealer network that is not required to report their dealership sales data back upstream to the corporate organization. It is extremely difficult to know which marketing tactics were successful and which were not in this scenario. In these instances, there is no connection between corporate marketing spend and the resulting sales because the data is simply not available.

This lack of data does not mean that all hope is lost! It simply means that other objectives need to be put in place that will help the company define ROI results. Marketers will need to think of ROI as something besides gross or net sales figures. It is still important to establish objectives that can be used as benchmarks of success.

ROI measurement is all about availability of data.

A business objective needs to be quantifiable. Lack of certain data does not mean that meaningful goals can’t be identified. It does mean that stakeholders within an organization need to agree on what reportable metrics are most meaningful and craft the protocol for ROI reporting that everyone agrees is the best measure of performance with the available data.

I have worked across several industries and brands where ROI needed to be customized for the company. The reporting can range from a single data metric to several metrics combined just based on what data is available. Some considerations and questions when defining an ROI model might be:

  • Is there a high-level sales goal in terms of revenue?
  • Is there a goal for increasing sales a certain percentage?
  • Is the goal to take market share from competitors, and is there research to verify that?
  • Rather than ROI, could a goal be to decrease cost per sale?
  • Are there points in the sales cycle that are indicative of sales performance? (e.g., growth in customer counts or foot traffic but no directly related sales data.)
  • Is there data that could be available on a micro-level (e.g., random sample) that can help extrapolate the performance of the larger initiative?
  • If the objectives involve something that is not directly related to sales (such as increase in brand awareness), is there current benchmarking data that can be used to track the cost and value of any improvement?
  • Is return based on media performance such as impressions, click-throughs, Web traffic, etc.?
  • Is there access to any competitive data that would help correlate the spend-to-sales ratio?

The starting point may be an assessment of what data you have available today, and then start asking the questions that can extract the most meaningful information from that data. The quest for developing improved ROI reporting should continue to evolve as your company becomes more effective at managing its data. The key is to start an ROI model with whatever is available today and continue to grow and become more sophisticated over time. ROI assessment will continue to change and evolve.

ROI measurement is all about availability of data.

About Two Rivers Marketing

Two Rivers Marketing is a full-service business-to-business (B2B) marketing communications agency. Email us with your thoughts or questions at blog@2rm.com.