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“How should we measure marketing ROI?”

July 29, 2010

From http://adage.com/images/bin/pdf/SmallAgencyWPweb.pdf

 

“PHIL JOHNSON: Before you can measure marketing  ROI, you need to identify the business problem you

want to solve. Do you need to create more sales leads? Do you need to increase awareness of your company? Do you need to fix a misperception about your company? Measuring ROI is figuring out whether you have been effective in solving one of those problems. To start with the easy stuff, you can set up campaigns and promotions that can be measured directly. Our favorite local burger chain, B Good, uses Twitter to promote a special offer, like free milkshakes between 1:00 p.m. and 3:00 p.m. With a little effort, they can see how that promotion increased

traffic. What’s more challenging is to measure the ROI across all of your marketing activities. At PJA, we often think about four data points when developing a measurement plan. Each one produces data that add up to a complete ROI story:

 Reach. This is the traditional way that people have always measured advertising campaigns. Reach tells you how effectively you’re broadcasting a message. It measures how many impressions you’ve made on an audience and their ability to recall what you’re communicating. Media partners can help you get this data.

 Response. To get more granular, you probably want to know how people have engaged with your marketing campaign. Did people click on banners, search for key words, watch videos, and in general take the action we wanted? By itself, response rates don’t measure ROI, but they do provide a lot of data about the effectiveness of a campaign.

 Attitudes. One of the big payoffs of social media is that it makes it possible to measure attitudes— positive and negative—that people have about a company or a campaign. You can look at the tone of blog and Twitter conversations to evaluate emotional responses. Specific tools like Radian 6 can help you get this information. You can also use pre and post-campaign surveys to see how you have influenced people.

 ROI. What did I get for all the marketing money I spent? It’s the Holy Grail. It’s what every company wants. It’s what every agency promises. Pursue it, but remember that it’s rarely clear-cut and requires that someone do the hard work of connecting the dots between the sales database, Google analytics, and all the data described above. You need to understand where customers came from and why they bought. It’s complex, but don’t despair. You can take some small steps that move you in the right direction. Google Analytics is a great tool to measure the effect of outbound marketing activities such as e-newsletters, blogs and Twitter feeds.

ERIC WEBBER: You have to start that conversation very early by defining what success will look like for every project you do. Both sides need to understand each other’s expectations. I know that sounds simplistic,

but I’m not convinced it happens all that often.

MARC BROWNSTEIN: There is no single answer. Measuring ROI in digital advertising and public relations

is much easier than measuring brand awareness, for example. Regardless, at Brownstein Group, we set up a disciplined process with our clients, where we determine the metrics of success and then measure them on a monthly or quarterly basis. In my experience, the hard part is agreeing to the metrics. Our client may want to measure sales/revenue, but if the advertising campaign doesn’t fully support a revenue- generating campaign (for insufficient funding, ineffective sales force at the client, or any other number of reasons), then my agency should only be held

accountable for results we can control.

DARRYL OHRT: I don’t think there’s a universal answer to this question, and ultimately it will depend on

your marketing goals, your industry and the mediathat you’re using. I guess that sounds like a noncommittal

agency response, but I really do believe that every marketing challenge is unique and deserves its own strategy for metrics. Nobody would attach a blanket response to “What should we be doing creatively?” for a campaign. Metrics are just as important and unique to the situation at hand.

 

CURT HANKE: Virtually every client has more data than ever before. That said, the problem is that these same

clients have less time and fewer resources with which to process, analyze or take action based on this data. In a world with so much information, it is far too easy to let the webmetrics go unchecked, the sales reports go unmonitored, and the research benchmarks collect cobwebs. In terms of measuring ROI, it frankly will be different

for almost every brand in every category. Are you a startup or a mature brand? A challenger or a leader? Trying to grow or defend market share? Increasing margins or trying to hold steady in the current economic climate? The fundamental dynamics of your business must drive how you define ROI — and this starts with asking the hard questions about risk and return before you pick up the phone and contact an agency. With some defined assumptions related to fundamental marketing return, you can then turn to the task of identifying key performance indicators. And don’t think of them in generic terms as “indicators of performance,” but rather, as “the biggest levers for

your business and brand.” The key numbers that — if you can make them go north — will make a real difference on your bottom line. There are a wide range of potential levers out there, varying greatly depending on your category,

market position and the like — from foot traffic to web traffic, from Facebook Fans to free-trial users, from search ranking to unaided awareness, from leads to referrals—each of which will ultimately contribute to sales and brand equity. Bottom line, this means establishing priorities — define what matters the most, and measure and

 manage it in a proactive manner.Yes, it sounds simple — but it will ultimately mean sacrificing other

initiatives further down the priority list. At the end of the day, it is about making choices for your business

and brand — and making sure that they stay top of mind for both you and your organization.

 

TOM MARTIN: Too often today, ROI is simply being measured at a transactional level. Brands run a campaign

today and they measure the effectiveness of the campaign based solely on its ability to drive trackable sales today. But ROI can be so much broader than that. For instance, what if you run an ad campaign that drives an offer and encourages consumers to follow you on Facebook or Twitter? Maybe the campaign doesn’t do so well in the sales metric, but what if that same campaign drives 10,000 new followers on Facebook and Twitter? What is the ROI on that future advertising savings as you can now talk to them without paying each time you speak to them? What is the

lifetime sales volume of a Facebook fan versus a traditional transactional customer? ROI is about so much more than sales, but companies today are not looking beyond anything other than current sales performance.

 

BART CLEVELAND: Measuring ROI effectively and realistically depends on several factors, [including] objectives, timeline and current market conditions. This means there is no single answer, except that ROI

should be measured and must be designed and agreed upon before the marketing campaign is developed.

Unfortunately, clients can’t help but expect ROI to be the cash register ringing immediately. We propose

analytics that track effectiveness based on specific marketing objectives. These often include several aspects of effectiveness, sales being one of them. But they can’t buy it until they like it, and they can’t like it until they know it.There are a lot of points to measure ROI along the way to the cash register. A particular place ROI should be developed is in social media. Currently, social media is the hot item. Clients may see it as inexpensive and a replacement for traditional marketing. However, measuring the ROI of social media is difficult, even if there is a

response component. I heard social-media consultant Jay Baer explain that no matter what anyone says, we’re still figuring out marketing through social media.”

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