With so many digital channels these days, it can be hard to tell where you should be spending your time and marketing budget. SEO, email marketing, PPC, native advertising, podcasts, social media…the list goes on!
But that’s exactly why it’s important that you spend your money and energy in the right places.
If you spend your time and budget on the wrong channels, not only will you be wasting your marketing dollars, you’ll also be missing out on potentially lucrative opportunities to grow your business on other channels. That means it won’t just cost your company thousands in wasted marketing dollars – it could cost you even more in unrealized revenue!
Thankfully, you don’t have to completely guess at what works. ROI is something that can be defined, measured, and analyzed.
But first, you need to understand some of the challenges with picking a single top-performing channel.
There Is No Consensus about Marketing ROI
As much as I’d love to offer you a magic bullet here, there simply isn’t one.
When I was preparing to write this article, I decided to read through a few surveys and studies to see what other experts and professionals thought were the most effective marketing channels.
Unfortunately, the results were pretty scattered:
Study 1: Ascend2
Study 3: GetResponse
So what gives?
Every business has different marketing goals and measures ROI differently. Econsultancy focuses on e-commerce marketing, so their survey is probably a little biased toward that demographic. Instead of saying that PPC is the most effective marketing channel, it might be more accurate to say that PPC is the most effective e-commerce marketing channel. At least for their audience.
In fact, only email marketing ranked among the top ROI opportunities across all three studies. And that’s because it does a very good job of achieving multiple marketing objectives and, for many businesses, has a heavy emphasis on sales (where it’s easier to measure ROI).
But as you’ll see when you read on, sales isn’t the only metric you should be evaluating your marketing on.
How to Measure Marketing ROI
First, let’s make sure we’re on the same page about what ROI is. ROI is your Return on Investment. The money you made in excess of your expenses, then divided by your investment and expressed as a percentage.
This allows you to compare two different campaigns regardless of their size. A campaign that makes you $1,000 for a $100 investment has a much better ROI than one that brings in $20,000 but costs $15,000 despite the fact that the latter earned you $4,100 more.
Your gain from investment should refer to the value that marketing contributes to your business.
In the most obvious example, that could be sales revenue. But it could also be website traffic, brand awareness, leads captured, or anything you desire. (You’ll learn more about selecting the best metrics in the next section).
Since each business has its own goals, your metrics will be different – which is precisely why I can’t make a blanket statement like “email marketing is always the best ROI for all businesses.”
Your cost of investment should be a summation of everything that goes into the campaign, namely time and money.
For example: if you pay someone $350 to write an eBook based on a case study you did and then paid a $150 editor fee to have someone polish it off, your total investment would be $500.
Now let’s say that your eBook captured $2,000 worth of leads. Here’s how the math would break down:
Most people would consider this very good.
Track Costs Properly
Be careful though – does that really capture the true cost of capturing leads from your eBook? What about the time it took you to prepare the case study? Or the costs of the lead capture software you used to collect email addresses from your site?
You need to make sure that you factor in expenses like that, too. Especially your time. If your time is worth $50 an hour, every full day you spend on a project costs $400. That only goes up as your salary does.
On the other hand, don’t double count costs either. If you paid someone to turn an existing blog post into an eBook or some other content repurposing, you shouldn’t include the cost of the original resource. It’s already spent.
And lastly, don’t forget to spread out shared costs.
For example: if you decide to upgrade to a CRM with better funnel tracking for your new campaigns, don’t just expense it all to your next project if others are relying on it. Instead, spread the cost out evenly across the projects that rely on that product.
Or if it’s a tool your business is going to invest in regardless of your marketing decisions, leave it out completely.
Select the Right Metrics to Measure Your Marketing ROI
While expenses are more or less straightforward, measuring the value brought in can be much more tricky. If you select the wrong metrics, you could end up wasting time and money chasing strategies that show pretty results but aren’t actually doing anything for your business.
An easy metric to track is something like sales revenue, but not all marketing efforts are focused on direct sales. Some strategies, like content marketing, are focused on building brand authority and nurturing the customer through a buyer’s journey before closing the deal:
The first step in selecting the right metrics is defining your goals.
You need to talk with your digital marketing agency, your marketing team, and other internal departments to agree on your role and how you will measure success. This requires that you understand the buyer’s journey and where your marketing fits in. Is your role to close deals? Retain customers and grow accounts? Increase brand awareness?
In a large organization, marketing might play all these roles and more. But each campaign should have a single primary focus.
Once you know what your primary goal is, you need to define a single metric by which to track it. For example: if your goal is to increase brand awareness, will you measure that by ad impressions or website visits?
Choosing the right metrics can be hard, but also one of the most important things you can do. If your metrics are wrong, you’re flying in the dark.
Here are some great resources to help you find the right metrics:
- 11 Key Performance Indicators to Help Improve Your Marketing (HubSpot)
- 6 Engagement Marketing Metrics & How to Improve Them (Kissmetrics)
- 10 Metrics To Measure Your Digital Marketing ROI (Augurian)
It’s important to focus on a single metric when evaluating your ROI. For example: if your goal is to pass more qualified leads to sales, then your metric should be qualified leads captured. The number of website visitors you get isn’t important. The number of total leads you capture isn’t even important. Total qualified leads are what count.
That doesn’t mean those other metrics aren’t helpful to track and improve the effectiveness of your marketing. But they don’t belong in your ROI calculation because they don’t directly contribute to your defined business goal.
Lastly, you need to assign values to those metrics – ideally, a dollar value. For goals like increased sales, the dollar value is inherent. Others need to be calculated.
Your sales team should have an idea of how much a qualified lead is worth, based on conversion rates and customer lifetime value. But sometimes a dollar amount just won’t make sense, as with brand awareness campaigns. In that case, you should just substitute the metric for the “return” section of the formula to find an average cost per result.
So if your goal is to drive traffic to your website, your metric might be unique visitors. If you spend $1,000 on ads that send 100,000 people your site, ROI would be 100,000 visits / $1,000 = 100 visits per dollar.
You can then compare that with your content marketing campaign that cost you $2,000 but drove 300,000 visits. So 300,000 visits / $2,000 = 150 visits per dollar.
If you want to compare these campaigns to more sales-driven efforts, you’ll have to assign a dollar value to each website visit. That’s not impossible if you know your average conversion rates, but just keep in mind the more estimates you put into the formulas, the less exact the results become.
2 Tools You Can Use to Track Marketing ROI
If you’re spending a decent amount on marketing activities, you should be using the right tools to track your costs and returns to make sure it’s as efficient as possible.
Tracking all of this manually can be time-consuming in itself and if your goal is to be more efficient with your resources, anything that gives you back time is a smart investment.
Kissmetrics integrates with your site and marketing tools to track each campaign you run and the behavior of the visitors they send:
If your site drives sales, it can even automatically tell you how much revenue each channel is driving so you know where to invest more energy:
But if your product isn’t e-commerce focused, you should still tie your marketing efforts to end results with an integrated pipeline CRM like Salesmate:
This will track your leads through the marketing funnel and then compare that with the results of your sales team, which is really valuable when you want to track qualified leads that result in sales instead of just generic total leads.
So what marketing channel provides the best ROI? Unfortunately, there is no silver bullet when it comes to that question. But it can be measured, calculated, and analyzed.
You just need to make sure that you accurately account for your costs and track the right metrics that result in achieving your business goals. So don’t rely on gut feelings or personal opinions when selecting your marketing channels.
Take the time to run the numbers and make an informed decision – that’s the way to achieve maximum results.