Marketing strategies: ROI calculation and its effectiveness

Measuring the contribution that a specific marketing strategy made to the income and revenue of the company is the panacea of marketing measurement since it is vital to define and orient the strategic results of a campaign and if it has generated a return on investment (ROI).

In this article, we tell you how to build a concrete framework for calculating the ROI and the effectiveness of your marketing strategies.

Why is it difficult to measure marketing strategies?

Surely, you have asked what type of results your marketing strategies offer to your company. However, knowing the answer may be very difficult. Some of the key challenges for the calculation of the ROI and the effectiveness of your marketing strategies are:

• Knowing when to measure. The money you invest today will have an uncertain impact in an uncertain moment in the future. 
• Several touches. The proverbial wisdom of marketing states that seven touches are needed in order to turn a potential customer into a sale. Even if that is not the correct number, the principle expresses a true statement: every marketing specialist knows that several touches are needed to create a customer. This fact makes it difficult for the income assignment to a specific touch. 
• Many influencers. The average purchasing committee of a medium-size company is made up of six people. In the case of bigger companies or more complex purchases, this committee can have 21 or more influencers. Marketing strategies affect every individual differently, so it is a big challenge to know what strategy has the greatest impact. 
• Other variables. Many times, other factors that are out of the control of the Marketing area can affect the results of the strategy significantly, from the macroeconomic tendencies to the climate and the quality of the sellers. If the income increased because the economy improved, can marketing specialists assure that their strategies generated a better ROI? 
  
  

Methodologies of ROI calculation and the effectiveness of marketing strategies 

Calculating the marketing ROI may be difficult but not impossible. Fortunately, there are several marketing analysis tools to provide companies with information about the calculation of the ROI and the effectiveness of their different strategies.

Every sequential method on this list will provide you with a more precise view of the important information for a customer, but this additional information also comes with an increase in costs and complexity. As a result, most companies begin the process of ROI calculation and the effectiveness of their marketing strategies with the first and second methodologies and they start to experiment with more approaches when they ascend in the maturity curve. 

According to the ROI marketing study of lead generation of Lenskold Group / eMedia, almost 2/3 of the companies do not do follow-ups or use single basic attribution.

1. Single attribution (first touch / last touch)

The most common methodology to track the result of your marketing strategies is to assign all the value to the first (or last) strategy that dealt with the customer. In general, it means to assign the interaction to the source of the first person of the company or to the key person. 

2. Single attribution with projections about the income cycle.

An obvious disadvantage of first-touch and last-touch attributions is that today's marketing investments may not produce results in some time, so your current marketing strategies ROI remains in the dark. 

We call this "tyranny of time". The approaches to measuring marketing ROI that do not take into account the reward of the investment time correctly can lead to making decisions favoring short-term revenue instead of raising long-term value. This is applied to all industries but its impact is greater on companies with products of considered purchase and long income cycles. 

The solution is making projections about the income cycle. When you add these projections to a single first-touch attribution you can have a deeper view of the long-term impacts of your programs. For example, instead of waiting to see the real results of your campaign, this approach analyzes the impact it had on the top part of the income cycle and improves the estimation of the long-term impact of the campaign based on historical conversion metrics. 

3. Attribute among several strategies and people (multi-touch attribution)

This approach acknowledges that several touches are needed from several people to close a deal and try to measure the contribution of every individual touch. How can you implement multi-touch attribution?

Start with the action you are analyzing (for instance, channeling creation, closed income, etc.) and track every significant touch that has affected all the contacts associated with that particular deal; make sure you take into account only the touches that happen before the action was taken. 

Once you have gathered the complete list of touches for a particular deal, next you have to assign the income, channeling, etc. of the resulting deal to each touch. This is known as multi-touch attribution and, it is better done with a single uniform distribution: if there were five touches, each touch gets 1/5 of the income. 

However, some companies decide to use a more sophisticated estimation strategy. For instance:

• According to time: it is possible that you want to consider some touches over others according to the time in which they occurred in relation to the action that added value. This assumption is especially right for those strategies that take place immediately before the key behavior. For example, the fact that a potential customer joined a webinar last week can have more influence on the decision of turning into a customer than those people that downloaded a technical document and those who attended a commercial campaign a year before. 
• According to function: it can make the strategies that affected the person responsible for key decisions stronger than those affecting other influential people. Make sure your estimation coincides with the reality of your business: a CEO should not carry more weight than a manager if he/she has little impact on the deal.
• According to the strategy:  some marketing specialists will choose certain types of touches over others according to the level of participation. For example, attending a seminar can have more impact than a visit to the website; however, be careful not to choose the most expensive strategies all the time just because they cost more.  

Make sure that each of these estimation approaches adds a subjective element to your ROI calculation. Therefore, apart from the assumptions of assignment you make, make sure you can defend them in front of the board of directors; otherwise, you may damage the credibility of the analysis. This is why I believe it is better to estimate all the touches equally.

4. Test and control groups

A great way of measuring the real impact of a particular marketing strategy is by testing the effectiveness of this initiative with a well-formed control group by comparing the results of the two groups. Almost anything can be measured by using a proper test design, but have in mind that is extremely expensive to measure everything with this method. 

With test and control groups, apply the program or process you want to measure to a component of your group of objective buyers and not to another homogeneous area of that group. Under the same conditions, you will be able to assign any difference in the buyer's behavior between the two groups to a particular program. 

For example, you want to measure the impact of one of the advertising campaigns of your brand on the target audience. A potential approach would be to divide your market into two equal geographical parts and spend double the money in one of the groups. 

You can compare the behavior of these two market segments to assess the effectiveness of your campaigns: did you experience greater growth in the direct search and in brand search in the geographical area where you spent more money? Assuming that all the other marketing and sales influencers of these two groups are the same, you can attribute any difference in traffic growth to the advertising investment of your brand. 

The resulting metric (what it measures) can be anything: income, revenue, potential customers, search traffic, conversion rates, average sale price, etc., or all of them at the same time. This is very useful when it is difficult to see the impact of strategies in areas such as income. 

You can also test almost anything: 

• Programs and tactics. Did that particular webinar have an impact? 
• Messages. What message had the greatest impact on your target audience? 
• Frequency of contact. How often should we send an email?
• Expenditure levels. What would happen if we double the investment in graphic advertising?

It is also possible to measure a combination of touches instead of single touches. This is an excellent way to test lead nurturing tactics which allows you to test and measure the effectiveness of a complete lead nurturing with regard to another one instead of sending individual emails. If you want to try several campaigns at the same time, you can also use multivariate test methodologies.

5. Market Mix Modeling 

Market Mix Modeling (MMM) shows how the results of sales depend on several touches of independent marketing and other factors outside marketing by using statistical techniques, such as regression. Only 3% of B2B marketing specialists now use this model to calculate the ROI and the effectiveness of marketing.

It is not an easy task to handle the different models and methodologies to measure the available strategies and, if you are part of the 20% of B2B marketing specialists who still do not measure the ROI of their marketing strategies, then starting to do so can seem discouraging.

However, according to an MMA / Forrester / ANA study, 87% of the senior marketing specialist are not confident about their capacity to forecast their sales strategies. This means that you have the capacity of getting a competitive advantage over 87% of your competence. 

Quality triumphs over quantity; it will benefit your company and will improve your marketing strategies with a few tight measures instead of using inaccurate and inconclusive metrics. 

When you invest your time and financial resources strategically in the development of a model to calculate the ROI and the effectiveness of marketing, you are destined to succeed; you will optimize your global combination of high-performance strategies to increase your sales, revenue and market participation of the company.