How to ascertain Marketing ROI in 3 important ways


04 Aug 2020 | 0

It is intrinsically challenging to obtain a value for a marketing campaign. Companies today invest a lot on a product or service marketing through various communication channels; nevertheless, do they get the expected result for the money, as well as resources they spent? To ascertain whether the expenditure generates revenue, companies use return on investment, also known as ROI, as a key performance indicator.
A marketing ROI thus can let you know the revenue produced from a marketing campaign or initiative. Likewise, if you want to know the performance of each marketing campaign, you need to measure marketing ROI in specific metrics at which your marketing expenses are generating the best profitable results. It is however presumed that measuring the return on investment in marketing is quite challenging for it demands the accounting of not just the expenses and basic campaign revenue but also other variables that differ for each campaign and the company that runs it.

Three Most Important Methods of Determining Marketing ROI
Obtaining a return on the investment a company has made is cardinal to planning investments in future with certainty. Though there are a few methods to measure marketing ROI, the three methods mentioned below are the most sought-after ones.

1.      Single Attribution Method
This method is most commonly used by companies to evaluate marketing ROI. Under this method, a value is given to the first channel or last channel that touched the sales lead.  Assigning or giving value to the first touch is giving all the credit of your marketing efforts to the first channel source that results in a qualifying lead, while distributing value to the last touch is giving full credit to the last channel source that results in a conversion lead, before placing an official enquiry.
For instance, in the first-touch approach, if a customer lands on a website organically and attends a webinar conducted by a company, the credit is given to the organic search and webinar, even if the lead is closed after a year. The last-touch model, on the other hand, gives credit to the last lead of sending an email after a webinar, though after waiting a year or more.

What are the benefits of Single Attribution Method?
Here are a few benefits of the first-touch or last-touch attribution method.

  • This method is quite easy to implement and measure ROI for short-sale or long-sale cycles
  • It offers simple-to-understand values when planning investments in future.
  • You can have advanced insights into early stages of lead generation

2.      Multi-Touch Attribution Method
With a multi touch attribution method, you assign value to every touch-point that contributes to the conversion. This model of attribution distributes either equal values or different values to the contributing channels that span a customer’s journey before leading it to conversion. For instance, a consumer, who wants to buy a pair of trousers, does some research, where he is targeted by some display ads. His attention catches an ad on the Instagram feed, which takes him to the display ads that he viewed earlier. In the end, he receives an email with a promotional discount offer, which leads him to buy one or two pairs of trousers.

Get to Know Some Popular Multi-Touch Attribution Models:

There is notable difference in the level of sophistication of various multi-touch attribution models given below.
i) Time Decay: This model is used predominantly to evaluate marketing efforts, with short consideration cycles, which, in other words, means the current marketing touch-points.
ii) U-shaped: Though this model tracks every touch-point, it assigns value to two key touch-points, which are the first touch and the last touch-point or lead conversion.
iii) Linear or Even-weighting: Used for long-consideration cycles, the linear model gives equal weights to all touch-points. It is suitable to those who do not have any understanding of a buyer’s journey across contributing channels.
iv) W-shaped: This is yet another model that unlike the U-shaped model gives credit to three touch-points. The mid-funnel touch-point is given higher value for the consumer is considered a lead here. The remaining touch-points however gets even values.

What are the benefits of Multi-Touch Attribution Method?
Using the MTA method has the following benefits.

  • Companies, with longer sales cycles leading to higher revenue generation find this model quite useful.
  • You can know the impact of marketing channels in the short sales cycle and gain insights that help plan marketing strategy in real-time.
3.      Test and Control Groups Method: This is considered to be an effective method of
testing a new initiative against a control group that is well-informed. It however asks for an appropriate test design to measure anything like profit, revenue, leads, and so on. It proves costly if used to test everything.
The method is effective to evaluate one component of your target consumer group by applying a program. Considering all the aspects being equal, you can attribute any difference in consumer behavior. For instance, to evaluate the impact of brand advertising campaign, you have to split the market into two geographical parts and spend more money on the one than the other. The behavior of the markets when compared gives an analysis of the effectiveness of the campaign.
If the market, on which you spent more money, shows the higher impact of consumer behavior, then you can give credit to it. 

What are the benefits of Test and Control Groups Method?
With this method, you can enjoy the following benefits:

  • Being a sophisticated, as well as analytical method, it shows the real impact of a campaign.
  • A test designed appropriately helps you measure the impact of any marketing program.

The marketing ROI methods explained above are the best ones in use and it is up to you to choose the one that suits your business.

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