As every senior marketer knows, delivering on your KPIs and keeping the board happy aren't necessarily one and the same thing. Marketing budgets are often the first to get cut in challenging economic times, not helped by the fact that demonstrating return on investment (ROI) has, historically, been fiddly to do and open to questioning regarding methodology.
So what exactly is ROI? Investopedia describes it as "a performance measure, used to evaluate the efficiency of an investment... ROI measures the amount of return on an investment, relative to the investment’s cost." Even today, with the benefit of online tools, proving ROI is still one of the major challenges for marketers, according to industry report State of Inbound 2018.
Perhaps it's hardly surprising that the adoption of content marketing has further complicated the quest for closed-loop marketing (simply put, understanding where the best and worst leads come from) in some respects – especially when content is used tactically, without strategic data capture and nurturing. Here, using marketing automation for a full inbound approach can make life a lot simpler, as the diagram below shows.
How micro do you go?
It's entirely possible to measure the ROI of your content campaigns down to attaching a monetary value to each single piece by taking into account the investment involved: employee, agency and asset creation costs, alongside marketing automation tools. This will give you a very clear picture of ROI; however, to break down your metrics to this level of detail, it's essential to make sure that the entire team involved in content creation is tracking their time.
This in itself can be problematic: if your content's being produced in house, time tracking could be an alien concept. However, without understanding the resources required to produce each piece of content, you'll fall at the first hurdle.
If you decide that you need to attach an ROI value to every piece of content, consider the options open to you that will enable you to capture everything that you need to know. Can you utilise existing project management software that has time tracking built in, or do you need to source a new tool?
Bear in mind that your CEO and board won't want to know how well each individual blog or content offer has performed – what they will be laser-focused on is whether the company is hitting its targets. So, regardless of how you use very detailed reporting to adjust your campaigns and resource allocation, you'll need to reduce down your findings to present top-line ROI results.
Decide on your metrics
Before you can get as far as calculating ROI, you'll also need to make a decision on which metric(s) you're tracking and how you'll be quantifying impact. Are you most interested in measuring lead generation, online sales or event sign ups, for instance? How granular do you need to go? Work out which metrics are likely to be the most meaningful for your organisation – we'd suggest you consider that, in most scenarios where you're looking to demonstrate adding value, you should home in on the metrics further down the funnel, from leads downwards:
• Web visits
• Landing page views
• Leads/contacts generated
• Marketing qualified leads
• Sales qualified leads
• Closed/won business
Pick an attribution model
Let's say you're not using marketing automation. There's still a range of different options when it comes to reporting on blog-generated leads, thanks to Google Analytics. If that's your situation, have a think about whether you want to simplify matters or gain a fuller picture of the buyer's journey through a more complex model. You can choose from models including:
• First-touch attribution, focusing on the awareness stage
• Last-touch attribution, where 100% of the value is on the last piece of content
• Time-decay attribution: here touchpoints closest in time to the sale or conversion get most of the credit
• Full-path attribution, which includes all the key touchpoints of the funnel
This array of choice might sound complicated, although if you're conversant with Google Analytics, you'll most likely be on familiar ground. GA geeks can really go to town with drilling down to the Nth degree and, if you're lucky enough to have a data analyst on board, all this is easily in your grasp (and more).
Our advice: do a sense check. A marketing automation platform will crunch the numbers for you and demonstrate which blogs are delivering (to understand the level of detail available with HubSpot automated blog reporting, for example, take a look here). That being the case, there's no need to replicate this work in Google Analytics – where Google Analytics comes into its own is as a tool to optimise the overall performance of your digital marketing. It's all about using the right tool for the job.
Simplify ROI reporting with an inbound approach
As we've already indicated, tracking and attributing ROI can be very involved – but there is a way to take the hard work out of reporting if you're following a full inbound methodology and focusing on the figures that will really matter to the powers that be. Your marketing automation dashboard will give you plenty of ammunition, with clear sight of visitors, leads and customers. Here are the key metrics to work through:
1. Calculate cost of customer acquisition
You can reach a figure for cost of customer acquisition by taking your full sales and marketing costs, including salaries and spend, over a set time and dividing them by how many new customers you've gained. If you're using a marketing automation system, you'll know exactly how many customers you've generated, so if you've been keeping close tabs on your smarketing costs, the sum couldn't be easier.
2. Calculate customer lifetime value
How much do your customers spend on average each year? Multiply that by the expected life of the customer to reach the lifetime value. You should already have a good idea of each of these figures – if not, it's a good excuse to do the legwork as a team.
3. Calculate payback period
You can also work out your payback period – the length of time required to recover the cost of your investment in gaining a customer – by dividing your customer acquisition costs by the annual value of each customer.
4. The killer metric: ROI
Lastly, how much money is generated for every pound spent on marketing? This ROI figure is the killer stat that can win you more budget, as it's so easy to grasp instantly. For example, five pounds in sales for every one pound spent in marketing produces a 5:1 ratio of revenue to cost.
To execute this calculation, divide the revenue you've gained by the sum total of the marketing variables only – for example content creation costs, agency fees, media spend including PPC and display ads – omitting your fixed salary costs. Your ROI ratio is an incredibly useful metric which can be calculated campaign by campaign to see where you're delivering the most value. Bear in mind that a target ratio of 5:1 is good, 10:1 is an outstanding result and anything above that can be classified as exceptional and, potentially, hard to hit consistently.
Tracking your marketing and sales funnel using inbound software will mean that you always have sight of how many visitors, leads and customers are reaching you through your website, so stay focused on these numbers. While there will always be offline interactions that may be missed, a good marketing automation platform will connect early engagement to a final sale in nearly all cases.
Having access to all of this information is a massive asset for monthly, quarterly and annual reporting, which suddenly become more manageable. Above all else, never lose sight of the importance of tracking your campaigns to a hard monetary value. Earning bigger budgets becomes a battle you can win, if you use your insights to keep iterating campaigns for maximum gain while tracking ROI to prove the all-important payback for every pound spent.
If you're just getting started with inbound marketing, why not download our ebook 12 Steps to Planning Your First Inbound Marketing Campaign?