Knowledge
Marketing ROI: how to measure the return on marketing
During a meeting in the “coffee” series on “Marketing ROI”, we considered whether we are able to measure the effectiveness of our marketing activities over the long term. Although the supporters of the performance approach (especially the online one) claimed that yes, tools for measurement are available, when we went deeper into the analysis, it turned out that not necessarily. It is hard to count the set of factors and events that over a long period of time can translate into the company’s growth.
It was stated, somewhat provocatively, that ROI (Return On Investment) understood “the hard way” is not marketing. At the same time it was emphasized that marketing goals are different from sales goals. Entrepreneurs often understand marketing as “how much do I have to spend on advertising” and expect a direct return: “I spent 100, so I want 150 in sales”. They treat the money spent on marketing as a tool for immediately moving the company to a higher level. They count on immediate, countable effects.
Where to start considering how much to spend on marketing? We should think about the value we offer our clients. We should know our product perfectly and conduct continuous analysis of what we offer. Next, we need to define marketing goals well; the goal may also be to reduce sales, e.g. when we want to quietly withdraw a product from the market. It is also key to find out in which areas to spend money in order to have ROI.
How does strategy relate to ROI? If I have a strategy that takes into account various activities comprehensively and coherently, and in which I measure ROI, then it makes sense. Measuring ROI for individual activities, however, gives only fragmentary information that may lead to wrong conclusions. If we have a sensible marketing strategy in which we take ROI into account, measure the money spent and earned, but based on a long-term strategy, then such a strategy cannot be replicated by the competition. The tactics of activities that the competition sees can be copied. But the strategy and the answers to the questions why I am doing this, in which direction I am moving and where I want to be in 5 years: the competition will not know that. Especially since the strategy can be modified on the fly. If we choose the right parameters of the strategy, a unique USP that distinguishes me on the market, and consistently build up the individual emotional elements, then after a longer time clients begin to notice how my brand differs from the brands of other market participants.
If you make a strategy and attach ROI to it at various stages, the overall ROI will be a completely different ROI from the one understood directly as “I put in 100, I want to take out 150”.
The general conclusion of the discussion is that there are no clear, precise rules for calculating overall marketing ROI. Instead, one should look at the long term. A balance must be found between performance marketing and strategic marketing. On the one hand, count and measure the effects and be careful with spending, and on the other, keep well-set, far-reaching strategic goals in mind.
