Is ROI A Good Way To Measure Marketing Campaign Effectiveness?
If you are a business owner, the term return on investment is probably always bouncing around in the back of your mind. This is especially true every time you pull out the business credit card: will this purchase give me good return on my investment? But what if I told you that using the simple return on investment formula on marketing is a mistake?
When it comes to marketing, many business owners apply the same thought process. Will spending this money on marketing give me a good return? Of course, the very objective of marketing is to attract new business, and so will contribute to your bottom line.
Using Return on Investment To Measure Effectiveness
The truth is that using return on investment to gauge impact can severely distort the true value marketing is delivering for your organization. This is because return on investment cannot possibly measure marketing effectiveness.
The notion of return on investment is not a bad one. Linking marketing to financial performance is absolutely critical. It’s just that most people who use return on investment in a marketing context probably aren’t applying it correctly, or really mean something else, says Dominique Hanssens, professor of marketing at UCLA Anderson School of Management. Return on investment's roots are in evaluating one-time capital projects. “But is marketing a one-time capital project?” asks Hanssens.
No, it's not. Marketing expenditures are technically an expense, as opposed to an investment, and that’s an issue here. In finance-speak, marketing costs are a profit and loss item, not a balance sheet item.
Return on investment is certainly an important metric for managers. But it falls well short of helping us understand marketing’s contribution to business goals, or how those contributions can be improved. Return on investment is simply too limited. It does not factor in the strategic intent of all marketing investments a company makes.
Trying to measure marketing solely in terms of dollars-in compared to dollars-out ignores the complex web of interaction that happens inbetween. Only by analyzing as many of those intermediate processes as possible can we gain insights into what’s working and what’s not, and alter allocations to achieve better results. It is difficult to put a dollar value on someone reading your content and remembering you when next he or she needs your product or service. It's hard to put a dollar value on someone recommending you to a friend over the dinner table. It's hard to put a dollar value on someone who returns to your website time and time again because you have established credibility and authority in your industry. Yet these are profitable and important interactions.
How to Properly Measure Marketing
Understanding how to measure marketing efforts begins with understanding where consumers engage with your content in the lifespan of a purchase and post-purchase. The consumer decision journey is actually a relationship between brands and customers that involves near-constant interaction. The best way to build this relationship?
Content. It is the one of the most powerful weapons in your arsenal to achieve this almost-constant relationship with your audience.
Through high-quality content, brands can fuel initial perceptions, inform research, build trust, and ignite purchase decisions.
What happens when your content is read and shared? It raises awareness about your brand expertise, services, or products. Most importantly, it makes your brand familiar to customers, putting you ahead of the game when consumers are considering an initial set of brands. A simple return on investment formula finds it difficult to measure such intangibles.
Of course, a single piece of content rarely makes for a sale; it’s just the start of a relationship that you can strengthen by continuing to deliver valuable content. You can make that delivery in a few ways; some of the most popular options are through an email, a social media post if they follow you on a social channel, or through paid re-targeting advertising.
The important thing to understand is that each piece of content is just a building block in the larger relationship you’re nurturing with a consumer. There’s no immediate end-game, which is a common misconception. Each piece of high-quality content strengthens the brand–consumer relationship until the point of purchase—and then it just keeps on going. Even if the consumer didn’t buy from you, they’ll remember you, and content will sway their perceptions about whether they made the right choice. It'll also influence whether they recommend you to their friends and family, whether they'll speak highly of you on a forum or in a review, and whether they'll come back to make another purchase.
The nurturing of such relationships is difficult to measure strictly in dollar terms, yet will have an impact on your sales and business growth.
The way to measure these relationships is through brand lift—the measurement of how people think about you in relation to your marketing objectives. In other words, it measures how well you’re building the relationship you desire with consumers.
You can see this through Google Analytics, for example, time spent actively engaging with content on the page. There is a direct relationship between engaged time spent with content and the likelihood that reader will return.
Repeat visitors are incredibly important for a few reasons. At a base level, repeat visits clearly indicate that you’re building a relationship with that consumer. Secondly, repeat exposures to content greatly increase brand lift.
This allows you to make two conclusions about pieces of content that are attracting a lot of readers and a lot of engaged time:
- That content is building relationships by compelling readers to return.
- That content is creating an increase in brand lift by facilitating repeat exposures.
Both outcomes are vital to the success of your business, yet not easily measurable by a return on investment formula.
In the end, remember: marketing is all about building relationships, and content marketing return on investment is all about measuring the power of those relationships. And making sales of your products and services, while crucial, are just one cog in a relationship wheel that never stops spinning. But using a variety of metrics—lift, engaged time and repeat visitor interactions —you can keep track of those relationships over time, and truly understand the impact that your content is having on your business.
If you settle for a seductively simple measure such as return on investment, you may severely distort the true value that marketing is delivering for your organization.
What do you think is the best way to measure the success of your marketing campaigns? What have you done that has made a campaign particularly successful?