What Not to Do When Calculating Marketing ROI | Mann & Co. Inc.

What Not to Do When Calculating Marketing ROI

What Not To Do When Calculating Marketing ROICalculating marketing ROI can be a highly involved, complex process.

You must account for certain expenses, take a broader view of your multi-channel approach, and focus on the right metrics. If not, your calculations will be skewed. No manager is going to take kindly to that. Especially if they believe your reports are painting a rosier picture than what reality dictates.

Customer lifetime value (or CLV) is one of the key metrics you should already know. If your CLV is in order, you’ve got a head-start on many businesses. Most don’t know what a single customer is worth to them.

But there are other mistakes you can make when calculating marketing ROI. Let’s have a look.

Focusing Too Heavily on “Soft” Metrics

Unless your goal is to build brand awareness, focusing too heavily on “soft metrics” could be a mistake. Most businesses are results-oriented. They want to see how marketing activities are leading to increased sales.

Soft metrics include things like email open rates, social media likes and shares. It also includes anything that isn’t directly connected to driving sales. There may be some instances where this data is relevant.

Most marketing campaigns increase in effectiveness over the long-term. Implementing a strategy takes time. You may not see significant ROI for months, or even a full year. Marketing managers don’t want a report on how their social media follower numbers are growing. They want to know how their marketing efforts are translating into revenue.

Downplaying Costs or Bloating the Benefits

Some marketing expenses are obvious like the cost of advertising, content creation, or your email marketing platform. But others aren’t. You can’t forget about the cost of wages, benefits, and other marketing costs. You need to consider these factors if you want to gain a holistic view of marketing ROI.

To avoid playing up the benefits of a marketing campaign, you need to isolate each marketing channel and evaluate them. Multiple marketing efforts are typically occurring simultaneously. Failing to account for all could cause more excitement in your company than is justified. The impact of each channel must be calculated to gain a clear picture of marketing ROI.

Not Agreeing on Metrics

What metrics are you using to determine the success of a campaign? Is there a consensus among your team? Or is everybody measuring what they feel is best for individual marketing efforts?

Calculating ROI could become a mess if you don’t agree on what to track in advance. Don’t rush into calculating marketing ROI if you don’t know what numbers to prioritize. What matters to your company may not matter to another.

Conclusion

When calculating marketing ROI, you need to create a company-specific model.

You can leverage one of the many formulas. But you’ll need to tailor it to your particular marketing strategy. Some organizations may use the exact marketing mix that you do, but many don’t. Your numbers will be skewed if you use their method to calculate your ROI. Plus, you need to discuss what metrics matter most to your company.

That isn’t to say that calculating ROI is perfect, as so often it isn’t. It’s about creating a model based on your organization’s priorities and what the ROI would look like.

How do you calculate marketing ROI? What are some other things you shouldn’t do when calculating it?

Let us know in the comments below.

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