ROI and Marketing: a difficult conversation?
Return on investment (ROI) is not a new concept, but how many of us can articulate it properly with our marketing efforts?
According to Forbes , “companies expect CMOs and other marketing leaders to provide quantifiable evidence that marketing investments are contributing to real business outcomes.” This doesn’t mean number of page views or ‘brand building’ spend but real, tangible net return on money spent.
Knowing how to define and measure your marketing success should not be an elephant in your (board) room. Below, the Think Beyond experts outline how to measure your marketing ROI and why you should consider partnering with a business consultant to break the conversation barrier and quantify the value of your marketing efforts to the entire C-Suite.
To speak directly with one of our marketing strategists, call 01625 682110 for a no obligation initial consultation.
Money well spent: calculating your marketing return
Marketing ROI is also known as MROI and is not to be confused with ROMI, which is an entirely different measure. A simple definition from Wikipedia  illustrates that return on marketing investment (ROMI) is “the contribution to profit attributable to marketing (net of marketing spending), divided by the marketing ‘invested’ or risked” which requires an estimation of the incremental sales attributed to marketing and their associated contribution or margin.
The journal of Applied Marketing Analytics  recommends that marketeers clearly define what they are measuring due to differing calculation methods across industries/businesses, scope breadth and where measuring on the response curve. They define MROI as “the financial value attributable to a specific set of marketing initiatives (net of marketing spend), divided by the marketing ‘invested’ or risked for that set of initiatives.”
Why MROI matters
For any of Think Beyond’s avid followers that read our guide to why marketing and finance should be BFF (best friends forever), you will hopefully appreciate that not being able to measure your MROI can severely hamper your ability to spend your marketing budget, could lead to your budget being cut or drive frustration in business owners who want to know that their money is being well spent.
Many marketing teams spend money on paid search and with good reason. The headline inbound marketing statistic is that a $1 spend on Google AdWords usually results in $2 additional revenue, according to the American Economic Association . There are examples of businesses achieving up to 13.11x the money ‘risked’ but that is the exception rather than the rule. Some would define $2 revenue for $1 spent as an ROI of 100% (the value of the initiative net of marketing spend divided by the spend on the initiative). Others would look at this and ask about the contribution/margin on the $2 revenue and it may paint an entirely different picture.
Sales teams that want improving sales can get frustrated with marketeers they see as ‘not pulling their weight’ if they cannot measure the contribution to their revenue/margin achieved. Some sales teams view marketing as a ‘brand builder’ and people who update the website.
How a business consultant can open up a dialogue
Think Beyond’s expert business growth strategists can help you with all aspects of your business strategy and to develop a robust marketing plan that aligns to sales objectives with results you can measure. By opening and sustaining a dialogue through a common language of defined metrics, MROI no longer requires translation.
The benefits of this open discussion extends right to the C-Suite and allows CFOs, CIOs and COOs to realise the value of marketing, creating alignment that is company-wide.
If you’d like to know more about how a consultant can help align your marketing ROI, call us now on 01625 682110 to arrange a business health check or complete our contact form to get in touch and we will call you back as soon as we can.