ROI is the guiding light among marketing metrics for many marketers. After all, it's not enough to know how much you're spending on ads or how much revenue you're getting without seeing that ratio and trying to make it as efficient as possible. But return on investment is a complex concept, and there are many different ways to calculate it.
Instead, today's marketers need to look at a more nuanced metric: return on marginal investment (ROMI) that gauges how much or how little an additional infusion of money affects your results.
In this article, we'll take a closer look at ROI (and why it's still worth knowing), how attribution can complicate — but ultimately improve — your marketing analytics, and what metrics matter most to your overall marketing plans.
ROI as a Guiding Marketing Metric
Measuring your return on investment is an excellent foundational step for insight into your marketing efforts. Keeping an eye out for negative ROI is crucial, as is noticing ROI lines trending downward toward unprofitability. But if you want to dive deeper into your marketing efforts, it's time to consider attribution. Here are some key points to keep in mind:
Attribution Models Require Subjectivity
Attribution models investigate the journey leads take toward purchasing to determine the impact of each touchpoint or individual marketing campaign. While not every ad will lead to a sale, those ads still improve brand awareness, keep your company top-of-mind, and alert shoppers to promotions or products.
For example, a shopper may see a tempting deal in your latest email but then go into a store to make their purchase — without referencing the email. Without solid attribution models, your company might decide that an appealing storefront, not email marketing, triggered the sale when the email made all the difference.
Attribution modeling is still an art, not just a strict science, so choosing the suitable attribution model can be tricky.
What the marketing industry knows to be true consistently is that:
- Models focus more on online sales (because online marketing and sales are easier to track)
- The more granular the model, the more accurate its insights
Depending on your business, you might prefer a linear attribution, which gives each interaction equal weight, or a time decay model, which ranks more recent interactions as more critical. No matter which model you use, elements like display ads are easy to track, while organic social media posts and blogs are much harder.
Attributing Leads to Revenue
Remember, not all interactions lead directly to revenue. Shoppers might remember your brand months later when they're more ready to purchase. Or they might refer you to a friend because they don't need your services. Tracking attribution is essential to find what compelled revenue-generating clients to buy. This more granular approach requires special tools, but it gives you a much clearer picture.
Attribution in a Cookie-Less World
Many attribution models use cookies. But as we approach a cookie-less world in 2023, your marketing tools and analytics platforms will have to find a new approach. This will lead to a bit of upheaval during the transition.
Customer Lifetime Value Isn't Consistent
As you measure your marketing efforts, ensure your reports capture the suitable timeframe for your business. The window for discovering, considering, and buying a birthday present may be much shorter than the sales process for cars or B2B purchases. So gauge your business's general customer acquisition timeline for a better holistic view of your metrics.
Incorporating Brand Building
We mentioned briefly that some ads won't lead to sales. They'll lead to greater brand awareness. Eventually, that recognition and positive attitude toward your company may lead to a sale, so it's important not to discount those efforts or cancel the campaigns. However, note that it is challenging to attribute individual sales to brand awareness, especially across short timeframes.
These "vanity metrics" can get in your way when running campaigns primarily focused on sales.
Selecting the Right Marketing Metrics
Whether you're running brand awareness campaigns or sales campaigns, these three metrics will always matter:
- Customer Lifetime Value (CLV)
- Customer Acquisition Cost (CAC)
- Conversion Rate (CR)
If your company uses search engine marketing for lead generation, you want to also carefully capture metrics that gauge the value of each campaign. Track these metrics:
- Paid traffic
- Engagement or bounce rates
- Form fills
- Conversions
- Marketing Qualified Leads (MQLs)
- Sales Qualified Leads (SQLs)
- Cost per lead
The Final Word on Marketing Metrics
Choosing the right marketing metrics to focus on is crucial, especially as companies of all sizes start to dive more into data analytics. While ROI is important, it shouldn't be the primary gauge for success. Instead, your priority should be attribution models and metrics that align with each campaign's goals.
At Mid-West Family Northern Illinois, we're here to help small and local businesses take a deeper look at their marketing metrics, create a marketing plan focusing on measurable results, and more. Contact us today to get started with a free marketing audit.
