The author is Founder & MD, Pulp Strategy Communications
Digital marketing initiatives can impact a business in many ways. Amongst other things, they can enhance lead generation, customer acquisition, retention, cost of operations, and customer lifetime value, as well as improve brand perception. Some of these initiatives can be short-term and generate tangibly favorable outcomes, while others yield better results in the longer run and end up benefitting the brand directly as well as indirectly.
While this abundance of approaches no doubt adds more weapons to a marketer’s arsenal, it also makes proving Returns on Investment (ROI) for digital marketing initiatives extremely challenging. How, then, can digital marketers justify their true value – and that of their digital campaigns – to the board of directors? Here are a few vital factors to keep in mind when talking about the RoI of digital campaigns:
The number of followers on Facebook and Twitter profiles; likes, shares, and retweets; sessions and email open rates – while the top management understands the importance of these metrics, it more often than not struggles when it comes to assigning them a tangible monetary value. This is where the whole thing essentially boils down to how much value digital marketing initiatives can add to the bottom-line of the business. Hence, if you have to report a return on financial investment, your support metrics must be linked to the revenue. For instance, you can show how increasing engagement at a particular phase of customer journey can lead to a consequent increase in the conversion rate. If any specific metric is unavailable, use other Key Performance Indicators (KPIs) that affect the metric that you’re moving.
Create a data repository:
Your marketing initiatives are going to need additional support metrics to prove their ROI. These could include the overall increase in customer engagement, average value of customers, reduced expenditures such as cost-per-click, and increased brand awareness across new geographies. Many such data points can help you analyze the collective value generated through digital marketing campaigns, including a noticeable change in outbound sales. You must therefore look to collect and record as much data as possible, both digitally and through your interactions with other departments. Doing so will also provide you with marketing intelligence and in-depth insights for future campaign rollouts.
Mapping individual support metrics over a period of time has multiple advantages. Primarily, it helps you relate your marketing campaign with tangible results on the KPI (Key Performance Indicator). Secondly, it plays a pivotal role in helping you figure out if a specific development has inadvertently affected any other key metric associated with it; has the increased engagement on social media channels shrunk the traffic flow to the website, or has the increased conversion rate lowered the average transactional value? It will, moreover, help you analyze the short-term and long-term impact of your marketing campaign over a period of time.
Leading and lagging metrics:
First, let’s understand what lagging and leading metrics are. Lagging metrics are input-driven indicators that are outcome-oriented and yield results after a marketing campaign has been executed. These include quantifiable information such as impact on revenue through marketing, leads generated, closed businesses, etc. On the other hand, leading metrics are the ones that are input-oriented and focus on the parameters that lead to a particular goal. Leading metrics are relatively tougher to analyze since they measure trends that bring about a desired outcome.
Both metrics have their particular use-cases and therefore have to be used in tandem with each other to generate the most favorable results. For example, if you only focus on revenue (a lagging metric) without tapping leading metrics that drive it, you will have no idea about what factors are triggering or influencing the revenues. It will also prevent you from taking preemptive steps to course-correct strategy in case of a missing goal.
Get the management onboard:
Your marketing campaigns can be pulled off more easily if you have the management by your side. Explain how cross-functional digital marketing strategies are bringing about the desired results by not only affecting the customer perception, but also driving results in terms of revenue. There are multiple ways that your marketing campaigns can assist the business, apart from immediate financial returns. Digital campaigns can help in generating critical customer-centric insights, leading to the development of in-demand products or services, as well as in foraying into more promising geographies which generate higher traction. This will help your digital marketing department in assuming a forward-looking and active role, rather than being solely used as an ancillary unit.