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Most marketers will agree that understanding the ROI of their work is a complex task — and determining where exactly this return comes from can be difficult for marketers to pinpoint. Marketing is broad and stretches across channels, audiences and campaigns, so it can be challenging to determine which metrics to track or how to interpret them. However, overcoming these hurdles is crucial for any business to understand how its marketing campaigns are going and how to make more informed decisions going forward.
In this blog, we discuss:
- How to measure ROI in marketing,
- Tips to Increase Marketing Spend ROI,
- Difficulties of measuring social media campaign ROI,
- How Dash Hudson helps track and measure ROI.
Measuring and analyzing data is essential for businesses to be successful, and the following guide will help you measure, track, and increase your marketing ROI.
How to Measure ROI in Marketing
The first and arguably most important step is establishing clear goals and KPIs for marketing campaigns. This can include increased web traffic, leads, or sales growth, and these KPIs will act as a baseline to help you determine which metrics are most important to track and how you measure the overall success of your campaigns.
Your next step is to use real-time performance tracking tools. These tools can provide valuable insights, such as impressions, views, demographic or psychographic information, and other important metrics that can be translated into revenue.
The most common formula for calculating ROI is:
This formula gives you a percentage of revenue generated, with 0 meaning that you broke even, a positive number being a percentage you gained over your original investment, and a negative number being the percentage you lost.
With the complexity of marketing in mind, marketers need to keep a detailed record of expenses, such as ad spend, content creation costs, or influencer fees. This data is then used to analyze the cost-effectiveness of different tactics, which gives a good idea of which strategies are performing well.
Some best practices to remember include setting a clear budget, regularly reviewing and adjusting campaigns based on performance, and experimenting with new ideas to determine what works best for the brand. The marketing industry is constantly inventing new ways to meet audiences, and experimenting with new tools is critical to ensure you’re getting the most ROI out of your spending.
Tips To Increase Marketing Spend ROI
Every business wants to increase ROI, but the challenge is figuring out how to get there. We’ve outlined some key tips and best practices that businesses can follow to get the most out of their marketing spend.
Repurpose Content
Content has value long after it is published. Brands can stretch a single piece of content indefinitely, maximizing its impact and value, by repurposing content for various channels and formats. For example, a blog post can be turned into a social media post. Clips from a long-form video can be edited into short form video content. Repurposing content extends its reach, taking advantage of the different audiences on different channels to increase engagement.
Time is money, and repurposed content is also a huge time-saver. It eliminates the need to create entirely new content for each channel. This is an important step for brands to maximize their marketing ROI.
Create a Newsletter
The importance of newsletters varies by brand, but they can act as a key opportunity for marketers to engage with customers, share content, and capture email addresses for further lines of communication.
Newsletters are very flexible forms of content. Brands have the potential to link to blog posts, social media, e-commerce, or other resources that help them achieve their KPIs. Newsletters also offer a great deal of customization, segmentation, and A/B testing, allowing marketers to increase engagement and ROI further.
Incorporate Paid Ads Into Your Social Strategy
Brands can increase the ROI of pay-per-click (PPC) campaigns by using keyword research from paid search to improve their social media content.
Keyword research identifies the terms and phrases that target audiences search for and how they really talk about your product on the internet. This can help improve your organic social content by making it more relatable. Cut out the words or phrases no one uses, and focus on the parts of your product that people care about. Hashtags also have value, particularly on social channels that prioritize discovery and trends, like TikTok.
In terms of paid social, marketers can use keywords to create highly targeted campaigns with relevant content, and viewers are more likely to convert. Most people are attuned to scrolling past ads, which means a significant amount of ad spend goes to waste. Putting thought into keyword research ahead of time helps brands make more of an impact with limited resources.
A/B Testing
A/B testing is a form of experimentation where brands test multiple ads and determine which one does the best. An A/B testing strategy can include anything from imagery, headlines, and layout to granular details such as word choice. Though it is called A/B testing, marketers can take it from A-to-Z by continually testing how they communicate with customers and recording the insights into which elements are most appealing.
This strategy can lead to higher engagement, conversion, and, ultimately, more sales. Testing and optimizing content will help brands make the most out of their marketing spend.
4 Difficulties of Measuring ROI of a Social Media Marketing Campaign
Social media is particularly difficult to measure the ROI for, as it incorporates many intangible concepts such as brand awareness or intent to buy. Ideally, a customer will click on a social media button and convert to a trackable e-commerce page, but it’s not always that straightforward. Sometimes they see an ad on Instagram and visit your retail store instead.
Other times, a viewer doesn’t buy your product, but they share your post with a friend who ultimately does. This is a complex process, and methods to overcome these challenges are explained below.
1. Establishing Value of Individual KPIs
Establishing the value of individual KPIs is difficult, as some are more abstract or difficult to connect to sales than others. Some KPIs may be more relevant to brand health or maintaining a positive reputation, which saves expenditures for PR crises or reputation management later on.
Brands should look at each KPI and determine what its value is. Is it superfluous, or can it be connected back to business objectives? If impressions or views are not driving conversions, brands may focus on more qualitative metrics, such as engagement rate or Dash Hudson’s Entertainment Score.
2. Business Objectives and Social Activity
Connecting social activity to business objectives is another thorny issue, as it is unclear how success on social media translates into business performance. Brands can clarify this by breaking down their business objectives into smaller goals tied to social activity and KPIs. For example, an increase in website traffic from social media, which ultimately builds up to a business goal to increase e-commerce sales. Once it’s broken down, it is pretty straightforward to measure.
When business goals are matched with social media initiatives, brands not seeing success can make informed decisions to change their strategies, such as making more engaging content, increasing ad spend, or targeting different audiences.
3. Creating a Social Strategy
Taking a step back and creating a social media strategy is also challenging. It requires balancing the business goals you want to achieve with the overall social media landscape in a period of rapid change. If your brand wants to increase sales, you can't just post more ads. You need to make content that audiences will respond to.
Social marketers need to create a detailed plan that aligns business objectives with channels and tactics that will work. This includes defining clear goals and KPIs, identifying the brand's target audience, and outlining how to reach them.
To adapt their strategies quickly, marketers must be active observers of trends. This level of agility is demanding; however, brands that invest the right time and resources can create a well-crafted social media strategy and ensure they are maximizing their impact.
4. No Access To Sophisticated Analytics Tools
While social platforms have native analytics, these tools do not provide the level of flexibility and customization required to glean insights specific to your brand, which is necessary to measure ROI accurately and make informed decisions. Sophisticated social media analytic tools are tailored to marketers' needs and provide much more data, visualizations, and trends across channels.
For example, while Facebook and Instagram analytics tools work in tandem, TikTok has different ownership. This means marketers will need to use multiple, incompatible tools and then manually calculate insights into demographics or engagement rates. As a result, measuring marketing ROI becomes an arduous, manual process, which limits marketers' ability to be nimble in a fast-moving industry.
Tools like Dash Hudson speed up the reporting process, allowing social marketers to track and measure a wide range of metrics across multiple channels in a fraction of the time with Social Media Reporting Dashboards. This enables them to gain more meaningful insights into audience behavior and show the impact of their marketing campaigns on the business.
Track Influencer ROI With Dash Hudson
Dash Hudson provides a comprehensive dashboard allowing users to track real-time influencer campaign performance. This includes tracking metrics like Influencer and Creator ROI Measurement, engagement rates, followers gained, clicks, and Earned Media Value, a benchmark measurement of an influencer partnership's effectiveness for your brand.
Finally, Dash Hudson's AI-powered tool, Vision, uses predictive analytics to identify and recommend content that will perform well with your audience. At a glance, marketers can determine which UGC and creative is worth investing in.
FAQs
What does marketing ROI mean?
Marketing ROI is a metric used to determine the effectiveness of a marketing campaign. It measures revenue against costs to determine how much profit a campaign generates. A positive number shows that the campaign was successful, while a negative number means the campaign cost more than the revenue it brought in.
Why is it difficult to measure ROI for content marketing?
Content serves a long-term purpose — building brand awareness, customer loyalty, the share of voice, and thought leadership — that is difficult to quantify financially. Content marketing often assists the sales process, making it challenging to attribute conversions accurately.
What is a good ROI ratio?
Good ROI ratio is positive. A ratio greater than 1, or 100%, means that the investment generated more revenue than the cost, which is a strong profit. However, every industry operates on different margins. Some industries intentionally sell products at a loss to gain market share, and what is considered a good ROI ratio varies depending on the company and its strategy.
