marketing roi

Today, Marketing, per se, is bigger than ever. If we were to dedicate a work of it in the new year, it would be “a phenomenon”, especially with the aspect of content marketing, multimedia adverts, and the corresponding (huge) investment on it. Inbound marketing being the largest driver of the online marketing revolution. However, the marketing metrics may be diverse, but it’s not tangible.

The investment consecrated to marketing, anyway, much to the chagrin of the sales team, is much higher than that of sales. The truth is that the marketing data and analytics that come in are a pretty hard to play. Marketing Return on Investment which also goes by the name of MROI or ROMI, in fact, means the contribution made by marketing (expenditure on marketing) in the profit, divided by “invested” marketing. The marketing data may seem tangible here, but it is not. And so, even the results may not be.

The reality is, and you’d agree if you have invested substantially in your marketing campaign, that there are an umpteen, and usually, pretty imperfect, ways to assess the return on marketing investment. There is no one rule of thumb and no time-tested method that can give you precise metrics on whether or not your expenditure on marketing has been fruitful.

Yet, most of us try to track those marketing metrics down and jump to understand what we believe tells us how well our marketing team is performing, and whether they have justified the investment made in them. That, we must tell you, is not fair at all! Marketing is, in more ways than one, different from sales. So, you may have been comparing apples to oranges. The truth is that it is not an easy task to measure the return on marketing investment. And, there are at least 3 gigantic reasons for it.

The Time Factor

We may have got the timeframe concept for the calculation of MROI all wrong. We often fail to differentiate between efficiency and effectiveness. While the indicator of the former is a high MROI, the latter is best reflected by the increased profits and better shareholder value in the long-term and where most everyone falters, is determining both in the same timeframe.

While some investments here are short-term and elicit results in a short span of time (around a marketing roiyear), there are some that do not. They may take longer than a year (say 2-3 years). If you fail to determine the nature of returns on investment on the various elements in your marketing mix, getting to the correct marketing ROI is next to impossible.

You need to differentiate between things like direct-response investments and brand investments. Different elements are bound to give you return at their own capacity and time. If these things are not paid attention to before a marketing mix is devised, you are bound to get misled.

There will always be analytics from sales, from clicks on your adverts, from paid marketing campaigns, but when you sit down to calculate MROI, you may not be able to derive a single ideal metric because a plethora of short-term marketing strategies works against the background of some long-term ones.

Approach towards Attribution

Like we said in the previous point, different elements in the marketing mix have different effects. The fact that all aspects of marketing cannot be measured absolutely is a big reason why marketing metrics are bound to go wrong. While we want to tread on a smooth path, with a clear approach, the truth is it is pretty mixed up.

Neither the brand marketing impact nor the direct-response marketing impact can be measured inmarketing roiseclusion. Both operate with and complement each other. So, one specific reason why we go wrong is when we produce analytics that assesses the success or failure of each differently. Suppose that your product launch did very well, and your discount promotions boosted sales by double, it may still not be justified to say that the increased marketing ROI is only in direct-response marketing, but we do it nonetheless, while totally ignoring the brand marketing investment that keeps operating in the background.

These strategies are actually the ones that define customer behavior and purchase patterns over a long period of time (2-3 years). So, we may be basically committing the error of mistaking the metrics of long-term measures for just an accumulation of short-term effects. You may think that it was the offer that attracted the customer, but actually, it may be your brand image iced with the offer.

With so many marketing initiatives being carried out at the same time, even if they are elements of the same marketing approach (whether direct-response or branding), it is practically impossible to determine which element did what for your marketing ROI. You cannot pick and choose. The aim has been achieved with the mix that your marketing team devised, so there is no one strategy that bags the prize entirely.

The Perspective

Conversions do not happen solely either because of offers, or discounts, or branding. It is both the brand as well as the customer behavior, that contributes to it. So, even if your sales skyrocketed; even if your sales ROI broke the records; you cannot segregate sales, customer behavior, and marketing data to arrive on metrics that make total sense.

You will come down to certain metrics but then, do not expect them to be absolute and authentic for marketing roithe formulation of a marketing mix for the future. Also, conversion doesn’t solely happen because of marketing. Sales play a very important role in it. One really needs to take into perspective before attributing what has been achieved by what. ROI, if we talk about it in general, in fact, also depends on all aspects.

These mistakes are not typical of any one business or industry; the biggest of them may end up committing these. Nevertheless, even if there may not be an absolute measure to decipher marketing ROI, there are ways that can decipher whether your marketing department is making progress and fetching you returns that are worth.


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