The role of the typical marketing department has changed so much since the advent of the internet, it is almost unrecognizable to what it was even 20 years ago.
In today’s business world, marketing is more of science than an art, a data-driven discipline.
As marketers have worked their way into senior management teams and even the board room, with it, comes the expectations of delivering against budget. Gone are the days when you received a marketing budget, spent it, and if the company was doing well at the end of the year then the marketing must have been good, right?
Today, a modern marketing department is expected (and rightly so) to justify spend and monitor the Return On Investment (ROI) for its activities.
The State of Inbound Report in 2016 found that marketing departments that tracked and their ROI received a higher marketing budget than those who didn’t. This is great news for marketers they are armed with the knowledge that if they want to achieve the companies financial goals, then they need X amount of budget, which they can justify. No longer are budgets just randomly assigned by a finance department who don’t understand marketing.
By tracking ROI across all channels, you know what is working and needs further investment, what isn’t working but might with a few tweaks, and what isn’t working at all and you can drop altogether. No more anecdotal guessing games.
For example, you might be trying to drive traffic to a specific landing page through a number of channels. You could make QR code, advertise on Facebook and advertise on Google. You would then track the traffic from each source and the eventual conversions to a paying customer. The majority of converting traffic is coming from the QR code and Google, but practically nothing from Facebook.
In this instance, you would add more budget to the materials that the QR code is promoted and on Google, you would then make the decision on whether to tweak your Facebook advertising of stop it altogether and reallocate budget somewhere else.
By knowing the ins and outs of your ROI, you’ll be better placed to justify marketing spend increases.
Calculating ROI isn’t easy. It’s not just a simple case of money spent V money earned. You need to be granular in what channels are working and why.
When it comes to inbound content marketing campaigns, it is even more difficult to justify spend and budget. Use your keyword research, blog traffic, and PPC analytics to attribute conversions.
Don’t forget the time spent on campaigns either. Your manager will want to see what spending 3 hours per day on social media or blogging means for the business.
When calculating ROI, you should include money spent on materials, creative, advertising, etc and the amount of time spent executing the campaign. This will give a more accurate account of what you have truly spent in relation to what you get back.
Think about using Customer Lifetime Value in your calculations instead of one-off sales. This can give a truer account of the success of a campaign. You might sign a client on an initial one year contract, but if clients stay with you for an average of 3 years, then this should be reflected in the ROI.
Here are some great online ROI calculators to get you started. It’s also worth looking at the Hubspot Inbound calculator as determining ROI on inbound campaigns can be slightly more difficult.