Measuring Return on Investment

Big Marketing Industry Problem: How San Diego Leaders are addressing the issue

The AMA last year revealed its first-ever intellectual agenda, the “Seven Big Problems in the Marketing Industry.” Our 2017 State of Marketing Report – The San Diego Perspective uncovered two additional “Big Problems”. In this article in our Big Marketing Industry Problems Series, the perspectives of Marketing Leaders articulated around the big problem of measuring Return on Investment (ROI) are outlined.

Across most industries, marketing leaders are finding it challenging to directly link components of marketing campaigns with ROI. To justify the importance of marketing expenditure to the executive board, marketers are faced with the challenge of explaining disconnects between marketing activities and ROI. This challenge is most prominent in industries with more technical products and services, where the executive board has an engineering mindset and is used to having their departments account for every activity.

Digital marketing has opened doors for measuring return on online campaigns, paid search and more, but measuring ROI for non-digital marketing campaign elements remains elusive for many. At one extreme, companies measure ROI based on income generated (the ratio of earnings divided by the cost within a timeframe), others are employing non-financial measures such as survey analysis of awareness, attitudes and behavior, while others are not even trying to measure ROI.

THE CHALLENGE

Among marketing leaders there are conflicting beliefs about how marketers should move forward with measuring ROI. Many have expressed their desire to completely cut non-digital or any type of marketing where performance cannot be accurately measured. However, those with a point of view on the other side of the spectrum emphasized the importance of non-measurable campaigns on overall brand awareness.

While there is agreement that digital marketing is incredibly important in terms of ROI because it is cost effective and easy to track, there is some concern that digital marketing gets credit for the impact of non-digital tactics in attribution analysis. While it is generally known that non-digital campaigns can be very effective, especially in combination with digital campaigns, some companies are forced to discontinue those programs when they are not able to show a direct link to revenue earned.

When new customer acquisitions are made through a digital channel, companies can directly trace whether those customers came through an email campaign or a social media post. What is less obvious is that the same customers may have been exposed to multiple non-digital campaign elements over time, that have kept the brand top-of-mind up to the point where the customer was ready to convert to a paying customer. Some companies will mistakenly attribute the new acquisition to the digital channel and disregard the general awareness that non-digital campaigns have created.

Non-digital campaigns such as those employing coupons in newspapers have been used by restaurants participating in our study, and although customers did not always utilize the coupon cut-outs, they still acted as an awareness building campaign by having presence in the paper on a regular basis where some of their older customers spent their time.

MEASURING ROI FOR DIGITAL CAMPAIGNS

There is a vast array of tools and metrics that can be used to measure ROI for digital marketing. Some of these tools yield hard metrics that analyze the actual revenue earned directly from individual campaigns and other tools produce soft metrics that measure non-revenue aspects of the campaign.

MEASURING ROI FOR NON-DIGITAL CAMPAIGNS

Marketers are being forced to look beyond the digital methodologies to measure ROI, that are relatively easy to track, and find solutions for measuring non-digital campaign elements where conversion rates are harder to track. Companies are finding ways to measure awareness, attitudes and behaviors to track performance. Below are some common methodologies used to track non-digital campaigns:

  • Tradeshow attendance
  • Total customer acquisition cost
  • Lifetime value of customers
  • Coupon tracking
  • Use of code upon purchase from magazines, billboards, etc.
  • QR codes to track interest according to number of scans

A B2B company in the 2017 State of Marketing Report – The San Diego Perspective uses several alternative soft metrics to measure the performance of their campaigns during events they sponsor:

ROI CONSIDERATIONS FOR BOTH DIGITAL AND NON-DIGITAL
  • In both digital and non-digital campaigns, it is vital to set accurate life cycles to each campaign and wait for the appropriate time to see the results. Some campaigns such as event sponsorships, tradeshows or online webinars may take up to a year to convert from an initial lead to a sale. Proper planning for the delayed effect must be carefully accounted for, so that correct scheduling of other campaigns are maintained during that in between period. Companies that do not perform correct planning may resort to short-term gains over building long term value.
  • With a plethora of emerging companies and startups, it is becoming increasingly difficult to stand out from the crowd. Brand awareness and customer satisfaction are therefore becoming increasingly important for companies to succeed. After the launch of different campaigns, companies are using marketing research in the form of surveys, interviews and online panels to test the effectiveness of the campaign and to measure if customer opinions are changing through interactions with the campaign.
  • Marketers are often in a dilemma of whether they should follow their gut instinct based on their years of experience, or if they should follow the statistically tested results from research and analytics. At times they will have the appetite to try out a new bold, revolutionary campaign that has not been tested out before so the option to rely on statistics is not even possible. It is not wrong to follow your gut instinct, as long as the campaign is tested out in the early stages to make sure it has the desired effect. It is important to iterate the campaign and make the appropriate adjustments to it based on the real-time results from analytics.
  • When B2B companies think about which campaigns will have the biggest impact on ROI, they take a very different decision approach from B2C companies. B2C companies usually only have one person to influence in the decision to buy their product or service. However, for a sale to occur for a B2B company, there are many influencers in the decision process. Therefore, when B2B companies think about a new campaign, they must consider each individual in the decision process and how influential they are. A successful campaign ROI will therefore be measured by how much the top influencer of that company was impacted or the number of multiple influencers that were positively impacted. 

It is important to have multiple touchpoints with people before they are converted from cold leads to paying customers. With the overwhelming amount of content available, people have become accustomed to blocking it out, especially online content. It is therefore important for companies to have a non-digital presence as well, where they can interact on a more personal basis with their customers.

MEASURING ROI IS A BIG MARKETING PROBLEM FOR MANY

Measuring ROI remains a large concern for marketing executives. As other teams are increasingly relying on marketing for a clear direction on customer need and wants, it is the responsibility of the marketing department to provide analytics that will guide the company in the right path. Marketing teams are therefore constantly finding methods and tools that can track a customer’s first touchpoint with the company, whether it is digital or non-digital, up to the final stage of conversion. Marketers are also searching for the ideal balance between digital and non-digital that will yield the highest ROI. It comes down to a combination of right timing of campaign launches and continuous tracking of their performance as they run through their lifecycle.

 

Q2 Insights, Inc. in partnership with FreshForm designed, implemented and reported on the 2017 State of Marketing Report – The San Diego Perspective.


Marketing is changing. The mindset of your customer is changing. The most successful companies understand and embrace change.

Today’s marketing leader must be more agile, data-focused, and customer-obsessed than ever before. We spoke to CMOs, VPs, and Director-level marketers from a variety of B2B and B2C businesses to learn how this shift in marketing is impacting San Diego.

Our 2017 State of Marketing Report – The San Diego Perspective is available now at no cost!

About Stephanos

Stephanos Trokoudes is a Research Analyst at Q2 Insights, Inc. a research and innovation consulting firm with offices in San Diego and New Orleans. He can be reached at (760) 230-2950 ext. 5 or stephanos.trokoudes@q2insights.com.

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