You’ve no doubt heard the phrase “the buck stops here.” And that’s what many people may think when they have successfully completed a marketing campaign. They look over the metrics and say things like “this campaign garnered 40% more clicks than last year’s” or “there was a 15% increase in transfers to our website from social channels.” But truthfully, the process is not completely over until you’ve evaluated how each channel contributed to your business’s bottom line. This means going past what was spent and brand awareness. There are still things to be learned, and that is when ROI analysis comes into play.
Basically, ROI (return on investment) is a number assigned to an initiative that tells you how much money the initiative made you. Sometimes marketers will estimate this number, stating its “probable” impact or “implicit” payoff. This will usually occur when the proper measurement is not in place, or the initiative itself was aimed at a more abstract goal like “brand awareness.” However, ROI analysis dives deeper into the data and assigns a concrete number to the impact each channel had on the business’s bottom line. This is not relegated to marketing, as it can also be applied to initiatives like HR and staffing optimizations or customer acquisition and retention.
ROI Analysis is important because it directly ties revenue to marketing initiatives. In digital marketing, we do not have to rely on approximated metrics (“We think about 80,000 people saw this billboard”). Instead, we can implement tracking and analytics that can catalog exactly how a user engaged with our ads, links, videos and more, which gives us exact numbers.
When people talk about “Big Data,” they are usually referring to the seemingly-endless amounts of data captured from users’ engagement (including the user’s demographic and actions).What we can learn from data is practically limitless, which is why people often get scared when they hear the term. Some examples of useful data include: what time of the year people are most likely to purchase your product, what kind of messaging gets the best conversion rates, which KPIs are the best signals of success and more. ROI Analysis uses the data collected in order to assess which campaigns performed the best and why. The why is very important as it will inform other business decisions and marketing initiatives down the road (this is what we refer to as “data-driven marketing”). The more data you have, the better your insights, which leads to better campaigns and more sales or leads generated. Therefore, Big Data should not scare us, but encourage us to rise to the challenge.
Though we often use ROI Analysis to assess how marketing campaigns perform, ROI analysis can be applied to virtually any part of your business to which you are devoting time and money. HR and staffing optimization is a great example of how, instead of assessing marketing collateral, we can assess human capital. What are the best times of year for your business to hire? At what personnel number is your business most efficient? At what rate of growth should your employee number be in relation to client growth? Similarly, ROI analysis can be used to aggregate data about customer purchasing habits, brand loyalty or even website design. These optimizations can make a huge difference in how your business runs.
If you are not generating a specific ROI for each of your marketing campaigns through various channels, it is important to ask how it can be attributed. There are many ways that digital attribution can work, but you have to choose the route that is best aligned with your business goals. If, for instance, your business generates mostly call leads, it would be imperative to include a phone number on your paid search ads. Using a unique, tracked phone number can tell you exactly what calls resulted from a user being shown an online ad. Tracking these calls to leads and eventual sales can help tie an exact ROI (i.e. revenue) to your paid search campaign. And anything less than that is simply not helpful enough. That is why measurement is critical and why ROI is the most important measurement. It essentially makes sense of the dollars you are spending and earning to give you a clear picture of your performance.
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This article was syndicated with permission from Asking Smarter Questions.