Marketing ROI, what it is, and how to use it.

One of the most important components of a marketing campaign is to evaluate its performance and impact and profit so that it can be determined whether or not your marketing efforts are actually helping the company. The insights gained through the process can be used to drive future, data-driven strategies for smarter decision-making. Let’s explore the concept of return on investment (ROI) in marketing:

What Does ROI Mean in Marketing?

Marketing ROI is the practice of attributing profit and revenue growth to the impact of marketing initiatives. By calculating marketing ROI, organizations can measure the degree to which marketing efforts either holistically, or on a campaign-basis, contribute to revenue growth. Typically, marketing ROI is used to justify marketing spend and budget allocation for ongoing and future campaigns and initiatives.

How is Marketing ROI Used by Marketers?

At an organizational level, calculating marketing return on investment can help guide business decisions and optimize marketing efforts. For marketers, understanding the ROI generated by campaign helps:

Justify Marketing Spend

CMOs consistently list allocating resources and budget for marketing efforts as a top priority. However, in order to secure budget and resources for future campaigns, it’s crucial that current spend and budget be justified at the executive level. To do so, marketers need to accurately calculate the ROI their marketing efforts are delivering for the organization. For example, knowing if native ads are driving conversions and ROI, while display ads fall flat. From there, budgets can be properly allocated. 

Distribute Marketing Budgets

Across online and offline channels, there’s a myriad of possible marketing mix combinations. However, any combination of campaign initiatives require funding. That’s why understanding which online and offline efforts drive the most revenue is a must for properly distributing the marketing budget.

Measure Campaign Success and Establish Baselines

A crucial part of any successful marketing team is the ability to measure campaign success and establish baselines that can serve as a reference for future efforts. With this in mind, accurately measuring ROI helps marketers do both. By understanding the impact of individual campaigns on overall revenue growth, marketers can better identify the right mix of offline and online campaign efforts. Moreover, measuring ROI consistently allows marketers to establish baselines to quickly gauge their success and adjust efforts in order to maximize impact.

Competitive Analysis

Tracking the marketing ROI of competitors allows marketers to accurately understand how their organization is performing within their specific industry. For example, marketers tracking publicly available financial data can estimate the ROI of competitors and adjust baselines to reflect these estimates—helping to keep efforts consistently competitive.