August 10, 2023

Marketing ROI: 3 Key Steps to Proving Marketing’s Impact

It has always been a priority for business leaders to show the value of their respective departments. However, an increasingly challenging and unpredictable macroeconomic climate has hastened the need for certain functions to prove their impact on the business’ bottom line — or the department’s return on investment (ROI) — in times of uncertainty. Today, more than ever before, marketing leaders are expected to justify every dollar spent by proving the tangible return their marketing efforts bring to the business.

 

Marketing ROI measures the performance, profit, and revenue growth brought in from various marketing channels, including email marketing, event marketing, social media marketing, digital marketing, content marketing, and others. Additionally, marketing ROI highlights the channels or messages with the biggest impact, providing valuable data and insight to inform future strategies and campaign efforts. 

 

Here are the three key steps to proving marketing ROI and the function’s positive impact on the business.

 

Step 1: Find a Formula That Fits

 

Identifying the marketing efforts that drive positive ROI enables marketing leaders to make smarter business decisions faster. When a channel underperforms, you can reinvest those dollars into a higher-performing channel or cut the program completely if asked to scale down your budget (an increasingly common scenario in today’s climate). It’s easier to defend spend and gain approval for further investments into technology or channels when marketing efforts clearly show positive and material business impact. 

 

There are various formulas that can help calculate marketing ROI. However, the following formula is valuable because it helps marketers understand the impact of each channel or vendor relative to each other. Calculating the return on spend is critical because it gives deeper insight into where to invest or divest.

 

Return on Spend = Pipeline Dollars Influenced / Marketing Cost

 

In this formula “pipeline dollars influenced” is defined as the total pipeline dollars influenced by the campaign and “marketing cost” is the total dollar amount spent creating and promoting the campaign, including digital spend, agency or contractor spend, and production costs. 

 

By itself, this calculation is great for giving an overview of the total return of a marketing campaign. However, because integrated marketing campaigns are composed of multiple facets, marketers can apply this calculation to each of the specific channels or vendors for a more accurate look into campaign performance. With a side-by-side comparison you can look at the cost of your paid social efforts compared to the total pipeline dollars influenced or break it down even further by evaluating specific channels (e.g., Twitter investment compared to its pipeline influence). 

 

Step 2: Measure Metrics That Matter

 

We live in an era of information overload. Even something as simple as considering a new monitoring tool gives way to myriad potential points of interaction — email promotions, ads in social media feeds, targeted web suggestions, explainer videos, webinars, events, downloadable assets, demo sign-ups, trial memberships, and more. As a result, fully understanding the effectiveness of digital marketing campaigns can be challenging. And because some tactics don’t generate an immediate tangible return (how often do people convert on a first touch?), it’s not enough to attach a simple marketing ROI model in an attempt to prove the efficacy of digital marketing efforts. 

 

The sheer volume of potential touchpoints in an integrated marketing campaign that spans over various periods of time makes accurate attribution to individual channels critical to determining success. There are unique key performance indicators (KPIs) for each of the various channels deployed during a marketing campaign that help measure marketing ROI. Some of the most commonly measured channels and their metrics include email (open rate and click-through rate (CTR)), social (reach and engagement), digital (clicks and cost-per-click (CPC)), and content (views and downloads). 

 

And while these metrics are a great starting point, they aren’t adequately able to identify which vendors or channels are the most effective at driving relevant engagements. To truly show value, measure your efforts through the lens of the accounts in your total addressable market (TAM) — also known as the accounts whose views, opens, clicks, and downloads are most likely to convert into a sale. 

 

When considering TAM-related metrics, the following KPIs help guide your efforts to increase dollar efficiency.

 

• Total spend: The total spend involved in whatever you’re focused on — a specific channel or vendor, or potentially all spend over a given amount of time. 
• Total visits: The total number of visits to your website within a specific date range.
• TAM visits: The number of visits to your website or specific landing pages that come from accounts in your TAM. 
• Cost per TAM visit: Total spend divided by number of TAM visits.
• Cost per opportunity: Total spend divided by opportunity driven from the campaign.
• Return on marketing investment (ROMI): Pipeline opportunity dollars divided by total spend. 

 

Step 3: Build Quality Campaigns Over Quantity

 

Now that you have the formula and metrics to measure marketing ROI, you must shift the bulk of your focus to the most critical part of successful marketing — an impactful campaign. Formulas and metrics mean nothing if you don’t have powerful, relevant, and action-inducing campaigns to return tangible results. 

 

Great marketing isn’t a numbers game and the goal isn’t to inundate the market or customers with noise. Multiple weak campaigns will never produce the type of positive results that high quality campaigns earn. Focus on building campaigns that are authentic, entertaining, captivating, and, above all else, memorable. These are the tactics and messages that build positive brand reputation and resonate with customers and prospects.

 

There is no secret to proving marketing ROI. The best marketers understand that success requires a strong vision, sound strategy, compelling content, accurate data, and relevant metrics. When you combine these elements together and deliver quality campaigns to a strategically targeted audience, marketing ROI proves itself.