Why Marketing ROI Is So Important, and How You Can Measure It

In today’s fast-paced markets, being data-driven is no longer enough.

The current marketing trailblazers realize it’s time to shift their focus away from monthly reports and onto insight-based decisions. They’re moving past backward-looking measurement and toward decision-focused management—and it’s redefining the way we think about marketing ROI.

Marketing ROI now needs to be thought of right from the outset, and in a closed-loop fashion. Simply put, marketers need to reflect on not only what the return was but which program achieved the best return—and use this insight for future decisions.

In fact, according to Forrester Analyst Tina Moffett, B2B companies are seeing an average rise of 15–18% in revenue as a result of optimizing their marketing programs based on this more sophisticated approach to analysis.

It’s clear marketing ROI is important. But why does it matter in your strategy? And how can you measure it?

The rising demand for marketing ROI

As businesses continue to search for new ways to drive revenue—and tighten their margins—the pressure on the CMO builds. Revenue teams increasingly look to the CMO to prove marketing’s revenue contribution and justify their investments.

But without a continuous focus on ROI and overall revenue throughout their strategy, it can be difficult for CMOs to account for the revenue they’ve generated.

That’s why forward-thinking CMOs are shifting toward a more revenue-focused approach to marketing accountability—one that ensures a clear claim to their portion of both past and future forecasts.

Metrics for success

Taking a revenue-focused approach to your marketing strategy ensures you remain accountable for your share of the sales forecast. But it also demands you rethink the metrics you’re gathering.

Your metrics need to be actionable and provide insights that inform decisions—rather than simply sound good and justify your marketing spend. Most importantly, they need to generate an ROI you can present to the rest of the board.

When you think about your marketing strategy holistically—considering campaign performance, channel performance, and business impact—it’s easier to keep your metrics revenue-focused and prioritize ROI.

Campaign performance

The first stage involves identifying individual campaign performance. Whether it’s an email, social post, or event-based campaign, you need to identify specific metrics that tie it back to revenue.

Rather than easy-to-gather metrics such as email open rates and social interactions that carry little tangible value, this includes metrics such as:

  • Sales lift
  • Average order value
  • Cost per action

Channel performance

After measuring the performance of the campaign, you can start to look closely at specific channels. Identify which channels are driving net-new acquisition, which are generating net-new website conversions, and which aren’t performing so well.

To optimize channels accordingly and refocus your marketing spend with revenue-based decisions, rely on measuring metrics such as:

  • Incremental sales conversions
  • Brand awareness
  • Channel reach

Business impact

With actionable insights gained from analyzing your channel and campaign performance, you can start to identify marketing’s overall business impact.

Certain key insights will enable you to generate a clear return from your marketing spend and support a decision-focused approach to marketing management. Look at both the short- and long-term impacts your campaigns had on:

  • Revenue growth
  • Shareholder value
  • Customer lifetime value

A definitive guide to marketing metrics and analytics

As CMOs become more accountable for the revenue their teams generate, measuring ROI throughout your marketing strategy becomes increasingly essential. And when it’s done right, it can be a strategic enabler of more trust, greater budget, and increased business impact.

Source Marketo blog

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