A friend recently referred to marketing as “magic” he wasn’t referring to it’s enchantment however, instead we were discussing how marketing is one of the first departments to be affected when a company goes under. We felt that this was primarily because it was hard to measure its ROI on the the bottom line.
I’ve encountered the ROI problem more than once in my current marketing role. How does one measure the impact of attending an event, having a webinar, or a speaking session. What is the impact of daily blog posts? White papers? A facebook or twitter campaign? Marketo addresses some of these challenges in this article. I think Marketo captures the way we measure webinar ROI pretty well, and the way I imagine most companies do as well.
I’ve learned that with events you can build out a campaign in Salesforce and measure the total leads, the market qualified leads, the sales qualified leads and the final revenue generated by an event and compare that against the total event cost to see what the ROI was.
Formula for that would be simply
total revenue generated by sales gained from event/ total event cost
Similarly if I wanted to measure the ROI of events versus webinars I could do
Total sales generated by leads from webinars/ total cost of webinars
Total sales generated by leads from events/ total cost of webinars
Seems pretty simple right? Unfortunately it isn’t. Some leads that eventually end up as customers are touched ny a number of different marketing activities. For example we initially meet the leadat an event, then we send them a webinar, then they maybe see us at another event and attend a speaking session. Finally, they decide to buy. Do I attribute the revenue from this final sale to each different marketing activity evenly? Do I allocate the entire sale amount to the first marketing activity? Or perhaps I allocated the total to the last marketing activity? In the end, I proposed an even split, but that was just a hunch. How do I know the specific instance that led this person to make a decision without asking them? Did they really get affected by each event or did one particular event convince them more than the rest? It is not a black and white, yes or no answer.
I think that making an effort to understand marketing and its effect on the bottom line is critical to ensuring that a company continuously allocates funds into the department. McKinsey& Company has specialized methods and techniques to do this, check them out here. However, I am not entirely convinced there is one correct way to measure ROI or that it is the only factor that one needs to consider when thinking about the effectiveness of marketing, Forbes contributor and VP of Marketing at MarketShare Daniel Kehrer explains why ROI may be wrong for marketing here
In conclusion, I’m all about the numbers in most cases, but I’m starting to question if one has to look at numbers, and ROI differently when it comes to marketing. Perhaps evaluating the effectiveness of different marketing efforts requires a different system than the traditional ROI model.