ROI: The Tough Questions

At a recent panel event, I was invited to discuss content marketing and a common question arose: “What is return on investment (ROI) for content marketing?”

Like any conscientious marketer, I wanted to give a comprehensive answer. But there are two problems associated with attempting a generic answer to the ROI question in a public forum. Firstly, you need to know about the business’s specific situation to give an accurate answer. Secondly, if you try to give a detailed answer without this information, everyone’s eyes will start to glaze over.

So, how do you answer the ROI question? I’d suggest a few things to take into account as you shape your answer:

1. How Are You/Your Clients Measuring ROI Right Now?

For many organizations, the honest answer is: “We aren’t measuring marketing ROI.” For even more organizations, the answer is: “We aren’t measuring it effectively.”

The purpose of this question isn’t to embarrass anyone, but rather to help level the playing field. If you want to persuade marketers to redeploy budgets to channels that they may still regard as new or unproven, the burden of proof rests with you. But the question aims to gently level the playing field by pointing out that ROI is a financial metric that should be applied purely to digital and social media.

Other channels also need to be justified in terms of ROI (and their ROI may be less convincing). The term ROI is bandied around a lot, but how many marketers actually have an agreed formula for determining ROI with their finance director? Return on investment is a financial measure: it is about revenue gained or costs reduced.

2. ROI Is Free – But Only When You Get Good at It

The same clients expressing concern about ROI often hesitate to pay for a report to assess their marketing mix and help them to fine-tune it. A successful marketing measurement program should more than pay for itself by improving marketing effectiveness over time, but that doesn’t mean no investment is required.

For example, there are several excellent platforms for crunching the numbers for marketing programs which help provide visibility on ROI.

But tools alone aren’t enough – effective marketing measurement entails a degree of change management. And this requires a degree of investment. It is only when ROI measurement and an optimization program is performing well that it starts to pay for itself.

3. Effective ROI Measurement Requires Digital Maturity

There are some challenges associated with proving ROI for digital channels when an organization has less experience in using them. In this context, digital maturity means having the skilled headcount, processes, and tools in place to measure ROI. It means having the right infrastructure in place. It also means that management is empowered to make smart decisions based on the insights that the digital team provides.

An organization that has some degree of ROI measurement around traditional media may find it an easier task to embark on ROI measurement in the digital and social space, because it has achieved some degree of insight on how its marketing mix is performing (provided that the data isn’t based purely on the optimistic reach figures provided by advertising vendors).

It’s not just a question of being able to generate the right data – it’s also about being able to connect the dots, so that all the media metrics (aka “vanity” metrics) actually connect to the kind of commercial income that could appear on a P&L.

In many cases, organizations won’t have sufficient digital maturity to move immediately to full measurement of ROI, because it’s not just know-how that is required – a lot of work is required to set up the necessary infrastructure.

For example, the customer relationship management (CRM) system is a logical place for organizations to store relevant data, but in many organizations, this data is fragmented, out of date, or simply absent. Furthermore, there needs to be accurate campaign attribution so that you know exactly what each part of the marketing mix is contributing to ROI. Without this, ROI measurements won’t be accurate.

4. Something Is Better Than Nothing

Print advertising or out-of-home placements receive some nice numbers around the reach and share of voice that have supposedly been achieved, but what is harder to ascertain is how much attention has been received, or whether any purchase consideration or action off the back of those placements has been generated.

If ROI of those placements can’t be measured, the only ROI number which can be put into a spreadsheet is zero.

It is fine for client-side marketers to have healthy skepticism about a newer, less familiar marketing approach, but those that expect a complete ROI answer for an unfamiliar marketing approach may find themselves in a can’t-get-there-from-here situation. This is because any new channel or approach needs to be fine-tuned in association with the overall marketing mix. The less experience that an organization has with a newer channel or approach, the more time and effort this may take.

It’s worth remembering that there are two main components in ROI: return and investment. Organizations tend to worry a lot about the return, and therefore hesitate to make the investment.

But even large corporations have something to learn from start-ups: creating a minimum viable product (MVP) that allows them to test what works before they commit to making a large investment. Although it won’t immediately generate a measurable ROI, the advantage of this approach is that it allows a company to learn and innovate approaches that work, and that will eventually drive improved ROI.

5. Digital and Social Media Have Nowhere to Hide

There may have been a time when digital was sufficiently new that agencies could wow clients with vanity metrics alone – numbers that might have sounded impressive but that didn’t connect to a commercial outcome. But those days are rapidly receding, as client-side marketers become increasingly digitally savvy, and know the right questions to ask. They are unlikely to be wowed by the number of likes or banner impressions that an agency helps them achieve.

But while digital is often criticized for generating an excess of vanity metrics, the numbers are still more meaningful than the published reach of channels that depend on arbitrary estimates of reach rather than actual data, e.g. print and out-of-home. The important distinction in the case of digital, much of data is indicative of actual behavior we are generating.

The ROI question should not put digital marketers on the defensive – nor should we feel the need to give a more comprehensive ROI answer than clients are getting from traditional media. It’s time for digital marketers to bring back some balance to the force.

Rather than feeling a 100 percent perfect answer on the ROI question is a must, remember quality of the answer depends on the quality of the data:

• Find out how prospective clients are dividing their budget for their entire marketing mix (even just rough percentages are fine)
• Ask them how they are currently measuring ROI for each component of that marketing mix
• Map out what tools, process, and capacities would be needed to help fill the gaps in determining ROI