Marketing ROI: How to determine the impact of your digital marketing efforts on revenueAfter running a multitude of different ad campaigns through social channels, google ads, email marketing and even SMS campaigns, you find yourself faced with a mountain of data and a business owner asking you, “Based on your data, how well did we do? Show me something that will help me know my money was well spent.”
We have all of these leads from a dozen different campaigns and we’ve spent all this money, the business owner will naturally resort to breaking down the total marketing investment and the total number of leads produced and arrive at a Cost per Lead.
And, yes, this is the standard way of measuring your return when running lead generation campaigns.
However, if we follow this standard path, the business owner will focus on lowering the cost per lead on the next round of campaigns. Why is that bad?
If we keep following this path of reducing costs per lead, naturally we cut back on ad spend and start cutting some of the campaigns. Then we begin looking for ways to reduce marketing costs to get the same number of leads.What is a better way of accurately reporting the return on your marketing investment?
If, instead, we can show the impact each channel and ad had on sales revenue and profits, you’ll arrive at a more accurate measurement of marketing’s effectiveness at generating sales. Consequently, you’ll also arrive at a place where you can forecast sales revenue on future campaigns based on increasing (or, decreasing) the marketing budget.
The standard way marketers used to measure digital marketing effectiveness
After conducting all of these campaigns, you are given a multitude of data to work with and much of it has to do with confusing us and making us feel good about how well our campaign went without really knowing how much of our efforts led to actual sales or how much of our efforts in the front of the sales cycle contributed to a conversion.
These are vanity metrics: likes, impressions, page views, and numbers of followers. These metrics make marketers feel good, but they don’t give directors, business owners and executives actionable information they can use to make business decisions.
The new way we analyze and evaluate digital marketing metrics and determining the ROI
If we start looking at buyer behavior and interactions with our campaigns, we can start making actionable decisions about what worked, and didn’t work. Tactical KPI’s measure opens, clicks, visits, downloads and submissions.
Now, typically business owners and executives don’t really care about this data either, but it does help guide marketers in optimizing ads and reallocating budgets towards more effective ads.
If we approach it from this angle, we can show that our efforts aren’t just throwing money away. We are like scientists. We form a hypothesis and create our ad and we think it will do well, but it didn’t. So, instead of throwing more money towards it, we shift gears and apply what does work based on what the data says.
Now we are showing management that we aren’t just a bunch of loose canons throwing money away on goofy Facebook contests. Instead, we are working on generating content that can be linked to actual sales.
How do we know our efforts are linked to actual sales?
Tactical KPI’s help marketers break down the customers journey through the sales cycle. When a lead is nurtured and led through a buying process with the help of digital marketing, we use data to measure what impacts our efforts had leading the them through the process.
When a lead turns into a sales opportunity, we now know what marketing efforts on the front end led to a conversion.
Executives are only worried about conversions. So, we give them information on Strategic KPI’s. We show them the number of leads each channel produced, the conversion ratio, average number of days to convert the lead, and the number of leads converted to an opportunity.
When we start assigning dollar amounts to a lead, then we can effectively report marketing’s impact on converting that lead and, in turn, and with reasonable accuracy, predict future outcomes based on how much you decide to increase or decrease the marketing budget.
Reporting in this way gives marketers and business units direction and the confidence to make informed business decisions that lead to positive outcomes.
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