We’ve been talking a lot about marketing metrics lately, and for good reason. Marketing metrics provide deep insight into the many efforts you’ve put into marketing your business or organization. They also play a vital role in determining how to best invest your marketing budget. So, how do you show that what you’ve been doing is working?
While there are many metrics you could utilize to offer insight into that question, it’s important to remember that not all metrics are created equally (if you need a quick refresher on key marketing metrics, right now would be a good time). While awareness and visibility metrics (such as views and likes) can help you feel like a specific tactic is working, other metrics can actually “prove” your efforts are providing a return on your investment, or ROI. Before we dig into which metrics to pay attention to, it’s important to first understand what ROI is.
ROI is essentially determining the impact of your marketing; what was the impact and how much did it cost to achieve, compared to how much you spent. While impact is often tied to sales (i.e. did the ad you created lead to a sale of your product or service?), it’s important to understand that the “impact” you’re measuring should always be tied to your business goals. For instance, if you’re goal is to increase awareness, then the “impact” isn’t necessarily sales, but could be foot traffic, website visits, likes on your social platforms, newsletter signups, etc. For the purpose of this content, let’s assume the impact you want to measure is profit or sales.
While there are different ways to calculate marketing ROI, a common (simple) formula used to understand the impact of your marketing is typically:
(Sales Growth - Marketing Cost) / Marketing Cost = Marketing ROI
Let’s define these important metrics, directly related to your ROI:
Sales Growth: This metric refers to the profit gained. Sales growth can be direct product purchases, services rendered, etc and is a pretty clear metric to track. It’s important to isolate the sale and attribute it directly to the campaign under which you’re tracking it. *If you aren’t tracking sales, replace “sales growth” with a metric related to your campaign. For example, if you are running a page-growth campaign on social, you should measure organic and/or paid growth instead of sales growth.
Marketing Cost: This metric refers to the cost of materials (e.g. printing), placement, time to create the marketing materials, as well as any ad buy.
A word of caution when using a formula to track ROI: Figuring out what portion of sales growth can be attributed to a specific marketing campaign can be difficult. Make sure that you create a specific tracking measure (a QR code or landing page for example) so you know that a certain sale is as a result of a specific campaign. Also keep in mind that there many different ROI formulas and that they must be tailored to your specific business, budget, and goals. Finally, ensure that you’re tracking ROI over a significant period of time. Buyers move through your sales funnel at different speeds, so measuring the direct results from a specific campaign could take some time. Patience is important and connecting the right metric with your campaign goal (e.g. awareness vs. sales) is vital.
The metrics above are not the only consideration when tracking your ROI. It’s essential to account for external factors that impact campaign success, including seasonal trends, weather, economic/social events, etc. Context is important and must play a role, so make sure your metrics don’t exist in a vacuum and, again, ensure they are tied to your specific business goals.
In short, marketing metrics provide quantitative “proof” that your strategy is working (or not working). While metrics don’t always tell the whole story, they provide an essential piece that helps you calculate a return on your investment. ROI tells you if your marketing is generating business in a profitable way and guides you in your budget and strategy decisions.
We hope this helps you understand how the metrics tied to your goals can (and should) be used to direct your activities so you receive a positive return for all of your hard work. If you want to dig deeper or have any questions, give us a shout!