Marketing professionals are often under pressure to prove return on investment (ROI) to justify their marketing spend, and marketing ROI can be tricky to measure. But with improved technology and a close alignment of marketing and IT teams, that’s changing. The future of MarTech will allow leading companies to better understand marketing ROI and prove the power of their marketing efforts.
If you aren’t sure how to accurately calculate marketing ROI, you’re not alone. A recent survey found that 61% of marketing leaders do not use ROI when making strategy decisions because they aren’t confident in their own data. And four in 10 respondents stated that marketing, sales and finance aren’t aligned on what successful ROI looks like.
Whether you’re a C-Suite executive looking to prove marketing influence or a frontline worker who wants to improve reporting on marketing activities, it all starts with uniting marketing and technology. Proving ROI on marketing requires an alignment of goals, better technology, and meaningful data and analytics.
What does marketing ROI mean?
Let’s start with an understanding of marketing return on investment (ROI). This is an important metric to measure if your marketing is driving profits for your business. It helps determine what is or isn’t working, so you can make changes to improve the effectiveness of your marketing and in turn, increase your ROI.
Breaking down this term will help us define it. “Return” refers to the sales or revenue earned from a specific campaign or overall marketing effort. The “investment” is the cost of the marketing campaign or overall budget. ROI compares these two numbers to determine how successful your marketing is.
How is ROI calculated? The marketing ROI formula is (Return – Investment) / Investment = ROI.
Or to put it another way: (Sales – Cost) / Cost = ROI. Once you get your total, you’ll multiple by 100 to get your ROI percentage.
Though this calculation seems straightforward, marketing ROI can be difficult to measure. This can be for a number of reasons:
- Disconnected data: Without data for each touchpoint of the buyer’s journey, it’s impossible to get a full view of how a buyer moves from lead to purchase. This can be especially challenging if you have a longer sales cycle. A disconnect between your leads data and your sales data breaks down the ability to directly attribute revenue growth to your marketing tactics.
- Lack of offline tracking: While so much of the buyer’s journey is now digital, there are many businesses that still generate offline sales. It’s crucial to track conversions (or sales) that happen through calls or other offline sales activities.
- Lack of alignment between marketing and sales teams: The marketing team typically passes leads to the sales team. But if those two teams are not aligned, sales won’t have the information that they need to convert those leads, and marketing won’t have data to understand whether their leads are driving revenue. This misalignment makes it difficult to track leads from marketing to sales.
Aligning technology and marketing goals
An internal alignment of marketing, IT, and sales helps build a clear 360-degree view of the customer and their journey — and a more accurate marketing ROI. To understand ROI, the marketing team must use data analytics to pinpoint which campaigns are most effective and where to allocate marketing dollars in the future. The IT team ensures data governance standards are upheld so accurate insights can be pulled.
Alignment between marketing and IT will deliver in three key areas:
- Customer Experience: Both teams put the buyer first to build an innovative, individualized experience. They combine a deep understanding of customer needs with data and technology to support each step of the buyer’s journey.
- Collaboration: They say two heads are better than one, and in the business world, two teams that are in alignment can also accelerate progress. This means work goes from concept to reality, data sets are translated into meaningful insights, the shopper becomes a buyer — and it all happens at an elevated level and on an expedited timeline.
- Focus: With shared goals and a collaborative plan, marketing and IT are on the same page. This level of focus and teamwork sparks innovation, ignites efficiencies, and fuels business growth.
With the current state of digital transformation, marketing’s metrics of success are evolving. Many marketers now have an overwhelming amount of data available to them, so they aren’t strictly looking at overall revenue as a success metric. By aligning their goals, marketing and IT teams can identify the most important digital marketing ROI metrics, or key performance indicators (KPIs), and ensure that they have the data they need to measure them.
Beyond overall revenue, these ROI metrics can include: cost per lead (CPL), lead close rate, cost per acquisition (CPA), average order value (AOV), conversion rates by channel or by device, exit rate, click-through rates, customer lifetime value (CLV), Net Promoter Score (NPS), time invested in project/campaign vs. returns, traffic to lead ratio, return on ad spend (ROAS), or customer retention rate.
Marketing technology to measure and improve ROI
To address the challenges of measuring and proving marketing ROI, marketers need to use tools and technology. They need data that marks each touchpoint in a buyer’s journey so they can accurately attribute marketing leads to sales revenue.
Data intelligence, or the effective use of data insights to drive informed business decisions, is the most important capability businesses can develop. Shifting from blind data capture to driving optimized customer interactions leads to greater marketing ROI and long-term process optimization.
Data helps measure the ROI in marketing – in other words, it proves how marketing drives revenue. It can indicate what’s working, what needs to be adjusted, and where to invest more marketing dollars for the greatest impact. Using data-driven insights, marketers can optimize the buyer’s journey to create a personalized user experience and support an informed purchase decision.
These optimizations are important ways to increase marketing ROI. Successful marketers use data to understand how buyers interact with the site and make strategic optimizations, while IT professionals enable easy, straightforward site updates so no one is wasting time on custom code. By harnessing the power of customer data to inform future decisions, marketing and IT can drive real marketing ROI, no matter the industry.
Need support to improve your technology and your marketing ROI? Contact our Avionos marketing team, or download “Solutions For The C-Suite: How CIO And CMO Collaboration Drives Digital Innovation.”