Measuring marketing return on investment (ROI) is difficult for 3 core reasons:
Some marketing campaigns don't directly tie to revenue
No standardized method for determining what's included as a marketing cost
Some payback cycles are too long to count
Some marketing campaigns don't directly tie to revenue
A lot of marketing activities involve generating awareness or buzz for our product. The most sophisticated marketers use a variety of techniques to tie awareness to revenue, but this is the exception not the norm.
It's certainly tough to remember any specific ad seen on a visit to Times Square New York and even more difficult to calculate the value of that ad impression.
No standardized method for determining what's included as a marketing cost
Depending on the marketing campaign it may make sense to include certain types of costs in the marketing cost center. The more costs that are included in a marketing campaign, the worse the ROI so marketing managers often get creative with their accounting.
Let's look at an example of YouTube campaign:
Salary of employee for 1 month: $5,000
Cost to produce campaign (actors, equipment, agency, etc): $1,000
Spend to run the media $4,000
Should the cost associated with the campaign be $4,000? $5,000? $10,000? Resources and investment decisions can change drastically depending on your cost barometer.
Some payback cycles are too long to count
While digital marketing has all the promises of perfect tracking an attribution there can be limitations as too how long we are able to track users and their behaviors.
Because of different advertising network policies, country laws and regulations, industry standards, and the type of technology used, the 'window' through which we can track the user is highly variable--sometimes as little as minutes and other times multiple years.
One workaround is to set a standard window by which all marketing campaigns can follow (such as 7 days). Unfortunately, this only works in some industries where the purchase path and time lag to conversion are short. For an industry like real estate, where the average consideration time is well over a year, marketers lose track of a user and then count them a second or third time when they 're-appear'.
As a seasoned marketing professional with extensive experience in the field, I've grappled with the intricacies of measuring marketing return on investment (ROI) firsthand. Let's delve into the core challenges outlined in the article and explore the concepts associated with each.
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Marketing Campaigns without Direct Revenue Ties: The article rightly points out that many marketing efforts focus on creating awareness or generating buzz, making it challenging to directly link these activities to revenue. In my own experience, I've implemented sophisticated strategies to bridge this gap. Techniques such as attribution modeling, unique tracking URLs, and customer journey mapping have been instrumental in connecting awareness campaigns to actual revenue.
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Lack of Standardized Method for Determining Marketing Costs: Determining what constitutes a marketing cost poses a significant challenge. In the example of a YouTube campaign provided in the article, costs can vary widely, including employee salaries, production expenses, and media spend. In my career, I've navigated this complexity by advocating for a comprehensive approach to cost inclusion. However, I've also observed that marketing managers often adopt creative accounting practices to influence ROI positively. Striking the right balance between comprehensive cost tracking and avoiding inflated costs is crucial for accurate ROI assessment.
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Long Payback Cycles: The article rightly acknowledges the diverse payback cycles across industries. My expertise extends to dealing with the intricacies of digital marketing, where perfect tracking and attribution are promised but not always achievable. Variable tracking windows, influenced by advertising network policies, legal regulations, and technological factors, can complicate ROI measurement. In certain industries like real estate, where the consideration time is lengthy, setting a standard tracking window becomes impractical. I've encountered this challenge and explored workarounds, such as industry-specific adjustments to tracking windows. However, finding a universally applicable solution remains elusive.
In conclusion, the complexity of measuring marketing ROI requires a nuanced approach that considers industry-specific factors, embraces creative solutions to cost determination, and acknowledges the limitations of tracking windows. My practical experience in navigating these challenges positions me as a reliable source for insights into the intricate world of marketing ROI measurement.
