Understanding the ROI of Marketing

If you are trying to work out the return on investment (ROI) for your marketing programs, then you need to start thinking about the bigger picture and how your social media influences your ROI.

ROI no longer just stands for return on investment. ROI also stands for return on impression and this has two primary values — a hard metric and a soft metric. These are far more powerful for measuring marketing than the single monetary value provided by return on investment.

But the new ROI of marketing goes even further than investments and impressions. It also should measure return on engagement, objectives, and opportunity. People share information using social media faster and more frequently than ever. Traditional ROI is just the tip of the iceberg. The interesting part is what happens beneath the surface. The hard metrics related to return on investment barely touch the surface.

Return on Impression (Views)

The first metric you can track using return on impression is the number of people who actually see your ad, marketing material, or another marketing piece. Online advertising can be tracked by the number of times an ad is displayed on a screen to a person. This is particularly easy to track if you’re running PPC ads. Marketers love the hard metrics such an advertisement can provide. But that only tells a small part of the story.

Return on Impression (Perception)

The return on impression is also a soft metric that focuses on giving value to a component of branding — consumer perceptions of the brand. Remember, companies don’t build brands, consumers do by experiencing those brands, developing feelings for those brands and emotional connections to them, and talking about those brands with other people.

Thanks to social media, those conversations are far-reaching. A marketing initiative performance analysis would be incomplete without analysing how that initiative affected consumer perception of the brand.

Return on Opportunity

Measuring return on opportunity requires you to evaluate the opportunity that a specific marketing initiative presents versus the time and monetary commitment that effort requires. Return on opportunity forces you to evaluate the indirect marketing potential of your marketing investments. This is particularly important when a marketing effort can take on a life of its own across social media.

Similarly, a marketing opportunity might not add to a business’ bottom-line today, but the indirect marketing opportunities that it could lead to as people discuss it and share it across social media can make that initiative worth the effort. Marketers who can successfully balance potential opportunity against effort will have a leg up on the competition.

Return on Engagement

Using social media as an example, return on engagement is a critical component of your marketing performance analysis because the conversations, sharing and word-of-mouth marketing that happen online can make or break a marketing initiative, a brand, and a business. The value of a positive online buzz about your brand, products, services, and business are difficult to quantify, but there is no doubt about how powerful they can be. You can use tools to track website traffic, content sharing, comments, and so on, but you also need to analyse how people are engaging with you, your content, and your brand. Remember, relationship brands are the most powerful brands in the world. Return on engagement can show you how well your brand is performing in terms of building and sustaining relationships with both consumers and influencers. The soft metrics data related to how and why people engage with you and your brand are extremely valuable to companies that prioritise them.

Remember, relationship brands are the most powerful brands in the world. Return on engagement can show you how well your brand is performing in terms of building and sustaining relationships with both consumers and influencers. The soft metrics data related to how and why people engage with you and your brand are extremely valuable to companies that prioritise them.

Return on Objective

Analysing return on objectives requires that you accept that not all goals are measurable with hard data. Sometimes, marketing efforts simply help a business move in the right direction to meet its long-term objectives. For example, a business that develops a content marketing plan and creates a useful repository of content on its blog, Facebook page, YouTube channel, and so on over the course of a year will undoubtedly move closer to its long-term objectives thanks to those efforts.

Return on impression, return on an opportunity, return on engagement, and return on objectives give you a clearer picture of how your marketing initiatives are performing, rather than return on investment alone. Focusing on traditional ROI only isn’t enough.

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Posted by Nick Bulfin on 15 May 2012