How To Figure Out The ROI Of Your Marketing Strategy?
Let’s get this really clear from the get-go; the ROI for marketing has never been easy to measure.
There I said it.
It doesn’t matter if we are talking about Barnum&Bailey posters in 1887, or content marketing via YouTube videos today. Marketers of all stripes struggle to know if their ideas are having a positive impact, and today that dynamic has become even more prevalent.
The online space has created ways to analyze marketing in forms that were never possible before. This is a mixed blessing and has also created some very difficult situations for marketing professionals.
Today the metrics are flying around like a horde of ill-tempered magic monkeys, and this leads many into a numbers-based approach to justify their efforts and existence to the C-suite, if not themselves.
You Can Prove It!
Don’t get me wrong, we all need numbers. It’s just that without context they really don’t mean much.
People want to know that the budget they are responsible for isn’t being squandered on meaningless content. While this is a natural urge, it is one that can be hazardous to building up a rocking inbound marketing strategy.
In addition to the C-suite obsession with concrete results (revenue), many marketing programs can be hard to measure via performance metrics. All of these factors come into play when the ROI from a marketing program is dissected, and you need to go into the process with your eyes open.
Knowing how to create a framework to analyze your marketing program is as important as the results, so let’s have a look at some of the ways your team can get a handle on how well your approach is working.
Where Are You Starting From?
Assessing ROI for an inbound marketing strategy will ultimately come down to money invested vs. revenue created. This is a deceptively simple equation, and applying it to a real business is nearly impossible.
The market is a whoooole lot bigger than your company, let alone its marketing strategy.
Ok, I get it, that sounds defeatist, and we need to come up with something.
For most businesses, the primary goals will be operational efficiency and revenue growth. That means showing the C-suite that the money spent on marketing “resulted” in raising revenue, especially on a gross basis.
In very plain English; new customers have to show up, and they have to spend money!
Any analysis has to be structured, and in the case of an inbound marketing strategy, the structure in question will probably rely on your company’s sales funnel. If your company doesn’t have sales funnel, it’s time to create one.
A sales-funnel is the perfect base for a revenue analysis because it demonstrates how many people are showing up to the website, how they interact with your content, and ultimately who is converting to a sale.
So this is where I have to be more general, as there are so many different kinds of businesses out there. If you sell shoelaces, your sales funnel analysis is going to be far removed from a company that sells a niche B2B SaaS product.
Just remember that your sales funnel is probably the best way analyze ROI on marketing, as it gives you a linear narrative and a solid revenue figure that the C-suite will gobble up whole.
Are We There Yet?
When we say growth, we usually mean increased revenue, right?
For an inbound marketer, this means creating a link between their efforts, and more people coming through the sales funnel. Thankfully this is easy to show in plain numbers, though the way in which you measure your results can vary.
To begin, you will need to set a concrete goal for your marketing strategy. The cool cats over at Weidert have a great blog post that breaks down how to use a sales funnel to analyze a inbound marketing strategy in the B2B sector, and it is worth a look.
In brief, there are a few factors you can use to see how well your funnel is working, and troubleshoot the stages that may not be perfect.
CTR and Lead Conversion Rate
For those of you who don’t speak marketing, CTR means Click Through Rate. Basically, you want to know how many people land on your site and then click through the sales funnel, and up the value ladder. Simple, right?
Lead Quantity and Quality
Not all leads are created equal. The initial goal of a sales funnel is to convert paid traffic to owned traffic so that they become a viable lead.
Customer Conversion Rate and Sales Cycle
This would be that part that gets the C-suite hot and bothered. The goal of any business is profit, and this comes from lead conversion. Past seeing how many visitors eventually convert into customers, it is important to look at how long it took. That is the sales cycle, and the shorter it is, the better.
If these seem simplistic to you, well, then you are probably an advanced inbound marketer. For a more thorough look at these ideas, this blog from Uberflip is a great reference page.
To be sure, the first two sections listed above are going to be far more relevant to the marketing team than management. Getting the visitors to convert to a lead, or owned traffic won’t make your company a dime. So the C-suite might not care as much as you would hope about these metrics.
What may excite a seasoned manager is a lead quality, as good leads usually mean eventual conversion to a sale. In the end, it will be number three that is the most important to the people at the top, as that final step in the funnel is what keeps the hosting bills paid.
So what metrics should you look at?
It depends on who you are sitting at the table with.
When you work within your marketing team, get excited about a 207% bump higher in visitor conversions, and yes, it is very positive. But when you are talking to the CFO about your group’s activities, you will need to show how all those visitors and leads are turning into new customers.
Ok, My Funnel Isn’t Working…
That may depend on who is deciding what “working” is.
Let’s talk about the relationship between marketing and sales goals.
It is common to assume that marketing, done well, will increase revenue. To some extent, this is true. But remember the market, and how it is so much bigger than your company? Well, that can have a sizable effect on revenue growth.
The top of the corporate ladder is always looking for expansion, regardless of whether it is possible or not. What this means for marketers is the need to boost the number of clients, and retain the people who are already creating revenue.
This is where analyzing ROI on marketing becomes a lot more like group psychoanalysis than anything scientific. The concept of fate or destiny is also valid when it comes to the overall economy. Marketers are always looking for a way to boost clients, and in sometimes it just isn’t possible.
Always remember that sometimes less money spent now can be a boon to future efforts.
Keeping your powder dry and all that.
So the first thing any marketing team should look at when analyzing ROI is the competition, and whether the market is giving back anything for their efforts. If everyone is taking a beating, it is time to deliver some unpleasant news to the CEO, and hopefully, they already know what is going on out there.
It’s Going Gangbusters!
If you are in the middle of an economic expansion, or your sector is making money hand over fist, and your marketing program isn’t blasting revenue into the stratosphere, then your team will need to make some changes.
The first thing you can look at is where your visitors are dropping out of the funnel. There are really easy ways to do this, and Google Analytics can be of help. Basically, you want to know why people aren’t clicking through to opt-in to owned traffic, or why your awesome incentives aren’t doing the job.
Another common metric to look at is the bounce rate, and this simply refers to how many people land on your site and then navigate away. A bounce rate of 50% is the stuff of legends, but if yours is over 70% that is a red flag. Creating landing pages is a good solution for a high bounce rate, and you also may want to look at the overall design of your homepage.
There is still a propensity to try and jam loads of information on the homepage, but this really isn’t a good way to go. People don’t like to be bombarded with information, and a busy page can be a big turn off. Remember that half or more of your users will be on smartphones, so they need to have a page that is easy to view and interact with from a finger’s perspective.
Make A Connection
While the C-suite might not care too much about conversions to owned traffic, we all know how valuable they are. Another factor to consider is how long your content is holding visitor’s attention. If people come to the site and only look at your blogs for a second or two, your team needs to make more engaging content.
YouTube is a good option for maintaining interest, and don’t think that you need a professional video production team on staff. In the age of YouTube people accept, or even prefer homemade videos. What counts is the genuine connection you offer people, not the production budget.
So How Do I Figure Out ROI?
Assessing the ROI for a marketing program isn’t going to be easy, or straightforward. The goal of any analysis will ultimately be financial, so keep that in mind when you begin.
It is a good idea to use a service like Google Analytics to look at how people interact with your sales funnel. This can help your team make sure that visitors click through the pages and opt-in to owned traffic, or convert to a sale.
While the revenue numbers will speak for themselves, it is your job to put them into context. In many ways, a marketing department has to market to two groups; the public, and management.
The data you collect from the website can help you to create a reference point for the revenue that your company generates so that you can show the C-suite that money spent on marketing means more revenue. At least that is the goal of the narrative you are creating for your boss.
Be sure to use some numbers, and smart graphics never hurt!