How to Measure the ROI of Marketing Campaigns?

In businesses the world over, executives are worried about the bottom line. Everything a company does – including marketing – needs to demonstrate its financial value clearly. Otherwise, it’s simply not worthwhile.

If you’re in marketing, or simply interested in it, then you likely know how often marketing teams are asked to show the return on investment – or ROI – of their projects. You may also be aware of why this is such a challenge, from proving impact to figuring out monetary value. 

Drawing on principles from design thinking, a popular innovation methodology, this article explains how to plan effective marketing campaigns and accurately measure and prove their financial performance.

Marketers Struggle To Demonstrate The Effectiveness And Financial Value Of Their Initiatives

Meet David, an ambitious chief marketing officer who’s worked hard to launch several marketing campaigns for his company in the last few years.

When a new CEO is appointed, David is asked to give a presentation on recent marketing initiatives, and he excitedly highlights all the different activities he’s spearheaded. Whether they’re TV and radio ads or community events designed to promote brand awareness, all of David’s initiatives have garnered positive reactions from colleagues and customers.

But the new CEO isn’t so enthusiastic. Although the campaigns were creative and well-received, his main interest is how much value they created for the company.

Many marketing professionals are under pressure from executives to show clearly their projects’ return on investment. And this is understandable, since corporate America allocates almost $300 billion to advertising each year. Despite this, however, seven out of ten CEOs feel that funds are wasted on marketing, according to a 2014 Forbes study.

With so much money on the line, marketers who can’t demonstrate exactly how their campaigns benefit the business may have their budgets cut – or even lose their jobs. A 2017 CNBC.com article even coined a phrase for this situation: “grow or go.”

So here’s the billion-dollar question: Why is it so difficult for marketing professionals to prove the financial returns of their work? Well, the answer is that the models used for marketing return on investment, or ROI, are limited in a number of ways. They simply don’t meet the expectations of executives who are focused solely on the bottom line.

For instance, existing models don’t clearly connect marketing efforts with the value they create. 

And without this chain of evidence, CEOs and chief financial officers can easily question the effectiveness of a marketing campaign. 

Additionally, current models have a narrow definition of value, and don’t consider non-financial factors like customer perspectives or internal business processes. These are essential in today’s competitive business environment.

To address these challenges and deliver the results that executives are after, the marketing world needs a fresh way to evaluate ROI.

The ROI Methodology To Define And Measure Impact

Here’s a scenario: A marketing team at a major bank gets a new director – let’s call her Marina. The bank’s performance has been declining steadily over the past few years, but Marina is determined to turn things around.

One of the issues that gets her attention is the bank’s high number of customer complaints. She looks into this and discovers that many customers feel that the company takes too long to address their concerns. 

So, after some brainstorming, Marina decides to fix the problem by introducing a new system for managing complaints and queries.

But before she can get the ball rolling, Marina needs a way to measure the effects of her solution accurately.

The ROI Methodology is a blueprint for defining marketing objectives clearly, creating roadmaps to reach those objectives, and collecting data along the way to ensure effectiveness. It’s built around several connected marketing levels, and analyzing data at each level allows a clear chain of impact to emerge.

The first level concerns the input – the different resources invested in the marketing campaign. These include financial resources as well as non-financial resources, such as the people working on the campaign. 

Next is the reaction level, which refers to how the chosen audience feels about the campaign. For example, do they find it useful or relevant? A positive reaction leads to the audience acquiring information from the campaign – and this is the learning level.

After learning, marketers ideally want audiences to act on the information, usually by making a purchase. This action level greatly influences the success of the campaign. 

When enough people take the desired action, a campaign reaches the penultimate level – impact. The final level is ROI, where the return on investment is calculated by comparing money spent on the campaign to the monetary value created.

But how can marketers ensure that there will be any monetary value to speak of?

Well, they can do that by designing for it. The ROI Methodology incorporates design thinking, an approach to innovative problem-solving that involves testing different ideas quickly and repeatedly in order to gain new insights. 

With design thinking, marketers can validate their strategies or change course if they need to, increasing the chances of a successful campaign – and positive ROI.

Positive ROI Starts With Considering Business Needs And Choosing The Right Solution Accordingly

Think about all the businesses you interact with. Perhaps you buy their products, use their services, or even work for them. Each one may be wildly different from the next, but one thing is for sure: they all have business goals and, consequently, business needs.

Every department, team, and project within a business is aimed at obtaining its needs, and marketing is no exception. 

With this in mind, you’d assume that all marketing campaigns and projects have business needs at their core. But, surprisingly, this isn’t the case. 

A study by the ROI Institute found that the number one reason marketing projects fail is a lack of alignment with the business.

This is why the ROI Methodology prioritizes business needs right from the beginning.

A key design thinking principle is to approach problem-solving with the bigger picture in mind. And this is behind the idea of aligning marketing campaigns with business needs.

To ensure alignment, marketers first have to ask the question, Why? Why is the campaign in question necessary? 

And why should customers or business executives care about it? The answer could be that the campaign will solve a problem, for example, or make money. By asking why, marketers can connect the campaign to a business need.

After clearly identifying the business need behind the campaign, the next step is figuring out the right way to meet that need. This requires adopting a curious mindset – another design thinking principle.

Marketers can satisfy their curiosity by conducting a cause analysis, which involves using interviews, surveys, and observations to find the root cause of a business need. Once the cause is found, curiosity shifts to developing a solution. 

A good way to do this is by coming up with a number of possible solutions, and then narrowing them down to those that are feasible and offer the most benefit. 

Feedback from people interviewed during the cause analysis can help ensure that the chosen solution really matches the need.

With a solution in hand, it’s time to focus on planning for success.

Remember those campaign levels we learned about earlier? This is where they come in. Marketers need to set relevant objectives for each level in order to stay aligned with business needs throughout the campaign. 

This means deciding on the reaction, learning, and action objectives of the campaign, as well as the desired impact and return on investment.

To Meet Marketing Objectives, Empathize With The Audience And Experiment With Methods

In the previous section, we learned that part of a successful marketing campaign is setting objectives at every level, from reaction to impact and ROI. 

Once this is done, the question becomes how to design the campaign and implement it so that all the objectives will be met. And design thinking has a couple of useful principles for achieving this.

At the reaction, learning, and action levels, marketers are first trying to get the attention of their audience and then influence their behavior. Doing this successfully requires empathy, which means considering how the target audience feels.

When the audience’s feelings are taken into account, there’s a higher chance of them reacting positively and proceeding to the next levels of the campaign. 

On the flip side, not empathizing with the audience quickly leads to negative reactions and a failed campaign. Marketers at the manufacturing company Kimberly-Clark learned this when a new product, Avert Virucidal Tissues, flopped. 

They didn’t realize that customers would associate the name of the product with the word “suicidal” – and that this would deter them.

When combined with experimentation, empathy is also useful for influencing the action level, which is necessary for impact.

Simply put, if audiences don’t take the desired actions, none of the impact objectives will be met. There are various ways to influence action, including trying to change attitudes and using brand ambassadors to encourage certain behavior. 

By using empathy to identify what matters to an audience and experimenting with ways of influencing behavior, marketers can find the most effective approach.

And the only way to know whether an approach is effective is by collecting data.

As marketers experiment, they should use methods such as interviews with the target audience, tests, and surveys to understand what is and isn’t working. 

By collecting this information quickly and often, marketers can learn where and how their campaign needs improving, and then make the changes necessary to meet their objectives.

To Get Credible Results, It’s Important To Isolate The Effects Of A Marketing Campaign

Imagine you’re part of a marketing team in a large tech company. Despite being a market leader, the company has been struggling in recent years. Customer satisfaction keeps dropping, and profit margins are shrinking.

The team learns that customers are unhappy because sales agents don’t understand the products, and so can’t make good recommendations. 

To address this, they design an internal campaign to educate the sales force. They work overtime on it, conducting training sessions and distributing resources. After the campaign ends, sales increase by 30 percent – a great outcome for the team!

But their excitement is short-lived. It soon turns out that the sales increase is actually the result of initiatives elsewhere in the company, not the marketing campaign.

At any given time, a company will have a number of ongoing projects – and circumstances in the outside world will be in constant flux. 

All this can influence the business areas that marketers hope to affect with their campaigns. For this reason, marketers need to isolate the impact of their efforts from other factors. This increases the accuracy and credibility of their results.

There are different quantitative and qualitative strategies to choose from when isolating the effects of a campaign. The one with the most credibility is the use of a control group – a group that is similar to the target audience, but that has not been exposed to the campaign.

Samsung used this strategy when attempting to improve the performance of a sales team in China. Two groups that sold the same number of units per month were selected, and only one was exposed to an internal marketing campaign. 

Afterward, the group that experienced the campaign saw an increase in sales, while nothing changed in the control group. The difference in performance allowed marketers to conclude that the campaign had been effective.

Once the effects of the campaign are clear, it’s time to calculate the return on investment.

First, marketers have to convert impact to monetary value. For example, if the campaign reduces errors in a department, the time and resources that would have gone into fixing the errors can be assigned a monetary value. 

Next, the costs of the campaign are calculated. This includes direct costs such as ad agency fees, and indirect cost like money spent on supporting the team. To get the final ROI figure, marketers need to subtract all the costs of the campaign from the financial gains.

Communicating Results Helps Secure Funding And Support For Marketing Efforts

Putting a marketing campaign together is no small feat. From identifying a business need to finding a solution that fits perfectly and implementing it, it takes a lot of time and resources. So a positive return on investment from such a campaign is definitely a reason to celebrate.

However, getting a return on investment is not the end of the story. If marketers want support and that all-important funding from their higher-ups, they need to share their results.

In design thinking, it’s vital to tell a compelling story about both products and processes, and this is true of marketing, too. 

Sharing the story of a campaign – including the results – helps executives understand the value of marketing projects, making it more likely that they’ll support future efforts. And even if the results of a campaign fall short of expectations, communicating the information can lead to necessary adjustments.

To communicate effectively, marketers should not only pay attention to what they share, but how they share it. This includes choosing the right time to share information, and tailoring the content, medium, and delivery to the audience. It’s equally important to tell the story of the campaign as clearly as possible, and use a modest tone.

In addition to communicating, another way that marketers can ensure support for their projects is by aiming to improve their performance continuously. 

The results of campaigns and projects should be analyzed in order to find opportunities for increasing the success of marketing efforts and maximizing return on investment.

This is important because departments within companies are often in competition with each other when it comes to budget allocation. 

If a department can’t show that its work is paying off for the company, managers will be tempted to reduce budgets, or even get rid of the department completely.

By focusing on improving and increasing their impact and ROI, marketers can continuously prove to executives that what they do is a worthwhile investment for their companies.

Conclusion

Positive return on investment starts with aligning a marketing project with business needs. Based on these needs, marketers can devise campaigns with clear objectives, whether at the reaction, learning, action, impact, or ROI level. 

Collecting data at each level allows marketers to assess quickly the effectiveness of their strategy – and make necessary adjustments that can increase the chances of success.

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