Marketing ROI: How to Know if Your Marketing is Successful

Many reoccurring themes emerge in meetings with new clients and prospects, but one of the most frequent is that of marketing ROI or, more specifically, “how will we know if our marketing is successful?” In the age of data, where everything a consumer does is measured and tracked, it’s often easy to overlook what we’re supposed to be doing with the data we work so hard to collect.

Specifically, when it comes to social media marketing ROI, even though social channels have continued to grow as a part of our overall marketing mix during the past ten years, many marketers still do not have a firm grasp on what their social strategy is or what metrics should guide it.

In the 2016 Social Media Marketing Industry Report, one of the top five questions, gathered from their survey of over 5,000 marketers was, "How do I measure the return on my social media marketing?" Given how often marketing ROI comes up in conversation, it isn’t surprising that 86% of those surveyed had this question in the front of their mind.

Many brands tend to focus on "vanity metrics" vs. numbers that will actually move their business forward. Vanity metrics are numbers that don't paint a clear picture of what is actually happening, and in some cases may even be manipulated in order to make something appear more successful than it is. These are numbers like page views, impressions, and downloads. It's not that these metrics don't matter, it's just that they tend not to matter as much.

The good news is that the answer to “is it working?” is a lot easier to find than you might think. In fact, the effectiveness of all your marketing channels, and your marketing ROI should be measured by the single most important metric every business shares: revenue.

With so many different channels and marketing metrics available, it's easy to forget that everything within your marketing arsenal has to support driving revenue for your business. Once you can isolate, test, and track which elements of your marketing help drive revenue, it's just a matter of supporting those metrics with effort and budget. Here are a few areas to focus on as you look for correlations.

• Website Traffic: is there a noticeable correlation between a rise in your website traffic and an increase in sales/revenue/new subscriptions/etc.? If so, does a relationship also exist between your site traffic and certain elements of your marketing? If more visitors mean more sales, then your marketing should pull its weight in that area.

• Customer Acquisition Cost (CAC): Simply put, this is the cost of adding one new customer. A general way to obtain this number is to add up all of your marketing costs, which include research, software, tools, and salaries that come out of your budget and divide by new customers within the same period. I recommend calculating this cost for a few months in order to generate an average CAC. Now, if you have a goal of how many new customers you need for the year and your Acquisition Cost multiplied by your goal number exceeds your available marketing budget – it's time to look at ways to improve what you're doing on a channel-by-channel basis.

• Customer Lifetime Value (CLV): What is the average duration that someone is a customer and how much revenue is that customer worth during that period. CLV is a key metric when determining the effectiveness of channels that acquire new customers vs. channels that retain customers. Additionally, it is important to compare your Customer Acquisition Cost to your Customer Lifetime Value to ensure they're proportionate. You obviously do not want to spend more acquiring customers than you get in return from them.

• Social Media Reach: This is the number of people who see your content (not to be confused with impressions, which is the number of times your content is displayed). Social Media Reach is similar to how newspapers and magazines measure circulation numbers or how TV networks use Nielsen ratings. This metric helps gauge the power of the channel for your brand, and it helps you assess what content is valuable vs. irrelevant to your audience.

Focusing on revenue, and which aspects of your marketing are proving to drive your business, might not be as exciting as discussing millions of impressions or social chatter. However, once you understand what measurements are critical, your marketing becomes stronger and more successful than ever.