HOW TO MEASURE RETURN ON MARKETING INVESTMENT

There are essentially five methodologies available to measure return on marketing investment.

Of course each methodology has pros and cons and each sequential method below increases in its cost and complexity – a nice trade off for increased quality of insight and understanding.

1. Single attribution method – first or last touch

This method allocates all revenue value to the first touch (marketing action) that generates a lead and is subsequently closed e.g. a blog or an eDM. Alternatively, you can allocate all revenue value to the last touch (marketing action) that generates a prospect or a closed sale.

The pros of the single attribution method

Easy to implement and low cost
Good for lead generation accountability
Investment per lead metric is simple to understand

The cons of the single attribution method

Insights lack the depth of subsequent customer touches
Doesn’t take into account the impact of lead nurturing
Date can be skewed so quality is hard to read

2. Single attribution with projected revenue method

If you add revenue cycle projections to a single attribution then you can start to understand the long term impacts of your marketing actions. By making assumptions based on historical data inputs you can start to project with a confident degree of accuracy what the likely revenue outcomes might be over time.

The pros of the single attribution with projected revenues method
- Places emphasis on revenue impact and not purely on lead generation
- Makes use of historical data inputs to quantify future value
- Acknowledges lead quality

The cons of the single attribution with projected revenues method
- Doesn’t account for multiple touch influence
- Heavily reliant on historical data which can be irrelevant for today’s circumstances
- Actual data must be entered once available

3. Multi touch attribution method

This method attempts to measure the contribution of the many individuals required for closing a deal. How this works is that a list of touches are identified with revenue allocated to each touch point via an even distribution (or weighted distribution for the advanced – however weighting adds subjectivity to your analysis).

The pros of the multi touch attribution method
- Acknowledges lead nurturing’s role
- Excellent for highly considered and long lead time cycles
- Acknowledges all touch points

The cons of the multi touch attribution method
- Still relies on hypotheses
- Doesn’t illuminate the inter relationship between tactics
- Equal weighting can over emphasise certain touch points

4. Test and measure with control group method

The key here is good test design. Comparable groups need to be set up – one as a control and one as the variable in order to isolate the touch points and overall outcome you are testing for. You can measure activities, tactics, message, media frequency and spend levels. Plus, you can test lead-nurturing tactics as well.

The pros of the test and measure with control group method
- Enlightens the actual impact of your test variables
- Flexible enough to measure almost any variable
- Not expensive, providing your test design of your control is strong

The cons of the test and measure with control group method
- It is generally a once off tactical measure so doesn’t report effectiveness of all activities
- Can be expensive and time consuming to test everything
- It relies on variables to provide insight

5. Market mix modelling

Market mix modeling reveals how revenue is impacted by multiple touch points through the use of regression statistical analysis. It then generates an equation as to the impact of marketing on overall sales revenue and each marketing elements contribution to the overall sales result.

The pros of market mix modeling
- Statistically accurate
- Measures the impact of all activities including external factors
- Provides understanding as to the effectiveness and efficiency of activities

The cons of market mix modeling
- Requires a lot of data which can be costly or impossible to collect
- Advanced statistical skills are required
- The use of a formula to drive short term impacts can upset long term brand building efforts
How to Measure Return on Marketing Investment-11

How to Measure Return on Marketing Investment-11

What is right for you?

US Research from Forrester tells us that 20% of B2B marketers don’t yet measure their return on marketing investment and a further 87% don’t feel confident in their ability to actually deliver against the revenue targets of their marketing activities.

The most important thing is to start! Start collecting data, start identifying touch points and start forming hypothesis for a great opportunity exists for those marketers who pay attention to their return on marketing investment.