What is marketing ROI and why is it important?

22 Feb 2023 in

With marketing budgets being increasingly squeezed, around 44% of marketers consider better measurement of Return on Investment (ROI) one of their top priorities. And yet for some reason, only 35% of marketers consider tracking ROI ‘very’ or ‘extremely’ important.

In this blog, we’re going to delve into marketing ROI and why it’s so important for your business. We’ll also explore how you can determine the success of your marketing activities with tools that make measuring marketing ROI quick and easy.

What is marketing ROI?

Marketing ROI is a business metric that measures the amount of profit, or loss, your business generates through marketing activities. An important aspect of measuring your marketing ROI is setting revenue goals against your marketing activities. For example, if you spend £1 on digital advertising, how much profit do you expect that £1 of marketing spend to generate?

A high ROI means your campaigns are making more money than you spend on them, which is exactly what you want. Nobody likes wasted budget, especially when purse strings are getting tighter. Calculating your marketing ROI enables you to see which activities have the most impact. As a result, you can plough more resource into the stuff that’s generating that all-important revenue, and take marketing spend away from poor performance activities.

What is a good marketing ROI?

If you’re new to measuring ROI, it’s natural to wonder what the average marketing ROI looks like. Of course, the average marketing ROI differs depending on industry, but a good rule of thumb for marketing ROI is to aim for a ratio of 5:1. An exceptional marketing ROI usually has a ratio of 10:1, but this isn’t a hard and fast rule.

In a nutshell, you want to be able to demonstrate to stakeholders within the business that every penny you spend is adding value. When that’s the case, it becomes easier to justify further investment into tried and tested marketing activities that drive growth.

How do you calculate marketing ROI?

Simply put, ROI compares the profits that resulted from your campaign to how much the overall campaign cost. A basic calculation for measuring marketing ROI is.

ROI = (Net profit of your digital marketing campaign/
Total cost of your digital marketing campaign) x 100

Of course, this calculation depends on accurate revenue attribution. Revenue attribution involves matching revenue from customers to specific marketing activities, and it’s the secret to developing campaigns that will have real impact on your bottom-line. To do this, you need full visibility of the revenue data associated with all marketing activities.

Why is measuring marketing ROI important?

The most important question, why measure marketing ROI? Simply put, if you can’t engage new customers profitably, why bother?

ROI measures the amount of profit, or loss, your business generates through your marketing activities. The ideal marketing ROI scenario is when the profit you make exceeds what you invested into your marketing activities. In other words, it’s money well spent that’s ultimately enabled you to generate revenue.

To hit your revenue targets in the most efficient way possible, you need to invest in activities that are generating the most profit and identify which ones are just burning up budget. An underperforming marketing campaign isn’t commercially viable, as your operational costs are likely to impact your ability to break even yet alone turn a profit. Measuring marketing ROI helps you figure out what drives the most sales at a granular level. You can analyse each campaign, channel, and keyword to see where those high value orders are coming from.

This enables you to make data-driven decisions about where you should and shouldn’t be focusing spend, and you can prevent under- or over-valuing specific activities in future campaigns. So, if your PPC campaigns aren’t delivering any leads but social is consistently generating sales, you can re-allocate PPC budget to drive even more activity through social.

It’s important to note that monitoring your marketing ROI needs to be a rigorous and ongoing process. The last thing you want is to take your eye off the ball and lose sight of the data that will help you put the pennies where it matters most to drive maximum profits with minimum spend.

As mentioned above, once you’re able to clearly demonstrate your marketing ROI to key stakeholders within the business, it’ll likely make it a whole lot easier to secure ongoing/ future marketing investment.

What tools do you need to measure marketing performance?

If your key focus is to improve your marketing ROI and start delivering maximum profits with minimum investment, you’ll need full visibility of the buyer journey from start to finish. But without the right tools in place, this is a huge challenge.

The customer journey is evolving every day and it’s becoming more complex. An increasing number of touchpoints means customers will interact with your products and/ or services on lots of different online and offline channels. It’s easy to connect revenue to digital marketing activities when purchase journeys take plane online-only. But, when customers pick up the phone and convert offline, joining up the dots can be tricky, and you can easily lose visibility of your true ROI.

If you want to accurately track profit and understand ROI, you need to be able to close the gap between online research and offline conversions.

Joining up the customer journey with Call Tracking

Infinity’s Call Tracking with Smart Match clears up your marketing blind spots and gives you the inside scoop on which campaigns, channels, and keywords are generating the most revenue via offline call conversions. Being able to pinpoint the specific marketing activities that resulted in a transaction, either online or offline, is a sure-fire way of accurately calculating your marketing ROI.

Plus, Infinity’s speech analytics suite, Conversation Analytics, takes your budget optimisation one step further by answering the questions you’ve never been able to ask: what is it about our product or service that has our customers on the fence? How are we converting leads? How can we turn that make-or-break moment into a win?

Conversation Analytics provides intel on common sticking points that delay conversions, and impact the profitability of campaigns. You can pinpoint the moment when sentiment dips and work with sales to create scripts that turn an unhappy caller into a loyal advocate. You can even highlight the language or the incentives that resonate most with customers and use that knowledge to perfect your call handling - and maybe even upsell.

Want to truly understand the ROI your marketing activities generate? It’s time to bridge the online to offline gap with call tracking.

Start a conversation with us today to find out how simple the process is.

Matt McGillicuddy

Matt McGillicuddy

Matt is Head of Brand at Infinity. He has extensive experience helping B2B and B2C brands enhance and manage their reputations, nail their positioning, and launch hard-hitting campaigns through data-driven decision-making.

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