ROI stands for "return on investment." In marketing terms, ROI refers to how much revenue you gain as a direct result of your marketing efforts compared to what you spent on those efforts. However, the ROI for a particular ad campaign can be measured in several ways, not all of which directly relate to sales or revenue (although increased revenue is the ultimate goal).
It’s crucial to align your marketing efforts to your goals. One study found that 91% of companies that feel they have a healthy performance management system say that employee goals are directly linked to business priorities — and the same principle holds for marketing ROI. Simply put, you must understand each marketing campaign’s main objective and set goals to achieve that objective. Then your ROI will be easier to understand and higher than it would have been otherwise.
Let's discuss how to identify the critical goals of a marketing campaign, how to choose KPIs that align with those goals, and how to measure and understand your campaign’s ROI successfully.
Identify Your Key Goals
The first step in successfully measuring your campaign's ROI is identifying its key objectives. Even though conversions and revenue are the ultimate goals of just about any marketing strategy, there may be other reasons for an individual campaign. For example, a campaign may focus on one or more of the following goals:
- Brand awareness: Maybe you simply want to make your brand top-of-mind for your consumer base. After all, consumers can't buy from you if they don't know your company exists.
- Lead conversion/generation: Before you can gain more customers, you need to have more leads into the sales funnel.
- Increased web traffic: The more visitors you can draw to your website, the more opportunities you'll have to convert them into paying customers. Also, analytics tools can help you examine your "referral traffic" — in other words, the sites, and platforms from which your visitors are coming. Once you know which sources drive your traffic bulk, you can adjust your tactics to build on that momentum.
The above points are just a small sample of key goals you may choose for your campaign. The point is, you need to know the "why" of your campaign before you attempt to answer "how well" it is performing.
Choose KPIs That Are Directly Related to Your Goals
Once you've established your key goals, it's time to choose the metrics that align with them. These key performance indicators (KPIs) should be directly related to the goals you've set. Examples of aligned KPIs may include:
- Click-through rate, open rate, and bounce rate for an email marketing campaign
- A classic ROI formula of ((return - investment) / investment) x 100 for a campaign designed to increase sales
- Engagement rates, new followers, and leads generated for a social media campaign with the primary goal of increasing brand awareness
- Total traffic volume, number of unique visitors, time spent on a page, bounce rate, and actions taken on a landing page for a display ad campaign designed to generate leads
Understanding Your ROI
After you've set your goals and selected which KPIs to use as markers for success, you'll be in a position to understand the real ROI associated with your campaign. Here are a few essential tips on how to do so:
- Know your "why": It's essential to understand the reasoning behind every marketing tactic you deploy. In turn, this will help you to measure the tactic's real ROI. For instance, an email marketing campaign designed to build brand awareness may have a low click-through rate and still yield a high ROI in terms of its objective.
- Measure consistently: Using multiple platforms and methodologies to measure your ROI is like using feet to measure one plank of wood and meters to measure another. It's important to analyze everything through the same platform and in the same way.
- Use an automated CRM system like HubSpot: A CRM can handle a lot of the heavy lifting for you when collecting data, formatting it, and analyzing the results.
- Revisit your goals regularly: The needs of your business will change. So, it only makes sense to periodically take stock of your goals and see if adjustments need to be made in terms of your objectives or the KPIs you're using to measure them.
In summary, you can successfully measure the ROI of your marketing campaign if you do at least three things:
- Identify the key goals of the campaign
- Select KPIs that align with those key goals
- Carefully analyze your goals and KPIs to understand the campaign's true ROI
The main benefit of this process is that you'll be able to plan out your campaigns more effectively in the future and spend your marketing dollars where they count the most. Your brand will experience increased growth as a result. And if you need help implementing these suggestions, consider reaching out to an experienced media partner for further assistance.