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Measuring Marketing Effectiveness: How to Prove Marketing ROI


Marketing ROI

How to measure marketing ROI to prove return on marketing investment and run more effective marketing campaigns.

We all know digital marketing is highly effective, but accurately measuring its success vs cost can be challenging. In an environment ruled by data, marketers can struggle to quantify and prove the link between expenditure and the bottom line to finance and the c-suite. The number of available marketing channels has exploded in recent years too, and this can make proving return on marketing investment (ROMI) an especially daunting task. But it doesn’t have to be. With the right tools in your arsenal, you can run high-impact campaigns and make proving ROI and ROMI to finance and stakeholders an easy job.

Read on to learn how to measure marketing ROI including metrics to follow and how to keep your focus on the bottom line.

What is marketing ROI?

Marketing ROI is straightforward. It’s a way of measuring the return on investment from the amount you spend on marketing. You can use this calculation to assess the return of a specific marketing campaign as well as your marketing as a whole, for a given time period. Measuring ROMI has several benefits including justifying your marketing spend, deciding where to place budget, comparing your marketing efficiency with competitors, and setting and tracking team KPIs.

How to measure marketing ROI

Calculate the cost of your marketing activity. Make sure you calculate the full cost of your marketing activity including creative development, media spend, software costs and staff time. Since marketing expenditure ties up capital, you may also want to include the opportunity cost associated with your spending and take into account the cost of capital in your calculations.

Establish your sales baseline. Once you’ve calculated the total cost of your marketing activity, you need to establish your sales baseline. This involves stripping away any potential earnings from the marketing activity to understand what your sales would look like without it. 

It’s useful to look at your historical sales data and what the future might look like to establish your sales baseline. A/B testing is another useful way to work out the ROI a campaign or program will generate, with the B group acting as the control group without your marketing spend. The financial value from your marketing activities should also be linked to increased customer loyalty. To work this out you need to measure how much profit was retained that otherwise would have been lost without the marketing activity.

Account for marketing lag time. Measuring the lag time associated with marketing spend can be a challenge but is also essential. ROI for digital marketing activities like content marketing, organic social media, and SEO can be difficult to calculate as they’re focused on brand awareness which cannot always be accounted for as conversions. Most of these activities take time to build, giving a lag time between spend and results. For instance, if you allocate a large portion of your marketing spend to SEO growth, it might take three months or more to take full effect and see return on spend.

Make sure you account for the time frame of your specific marketing activities. If you’re investing in tactics that take time to build up—but have the potential to create long term impact beyond the length of the campaign—you need to account for these.

Attribute ROI to touchpoints. Sadly, not all customers see an ad and convert on the spot. Conversions are a journey, and customers come into contact with your business in a variety of ways. It’s easy to attribute a sale or conversion to the final touchpoint–whether it’s a search ad, a landing page, or something else. But attributing your ROI to this in this way gives more weight to certain touchpoints and ignores others. For example,  your Google Ads may appear to have impressively high conversion rates, but those conversions will also be attributable to other marketing activities such as web pages, lead forms, social media visibility, testimonials, etc.

Make sure you account for all touchpoints along your customer journey by analyzing and understanding how your potential buyers are interacting with your brand. As an example, tracking engagement on social media and analyzing its relationship to an increase in sales can help build a picture of how the two figures intertwine. You can test ROI-touchpoint relationships by predicting revenue increases in relation to your marketing tactics too. This helps you understand the variables in your marketing campaign and how they affect your overall ROI.

Create a customized reporting dashboard in Mediatool

Having the right tech at your fingertips to effectively measure digital marketing ROI is more important than ever before. When used correctly, the right platform will empower you with the tools to constantly monitor your marketing activities and link them directly to key metrics such as ROI, KPIs, and goals. So you can refine your marketing activities to get the best return on investment. With Mediatool, you can create customized dashboards that track your spend across your channels and campaigns and easily generate reports on revenue earned, attribution, and ROI to prove your marketing impact to other departments in your business. 

Book a tour to find how Mediatool can help you track and prove your marketing ROI and run more effective marketing campaigns.

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[2023 Update]
[2023 Update]