What are the factors that should not be overlooked in the calculation;
How to quantify non-financial results.
In today’s business landscape, investing in digital marketing strategies is essential for growth and competitiveness, but how do you ensure that the expense is justified?
The answer lies in calculating marketing ROI, which measures the value generated compared to the costs incurred to implement existing strategies. Its goal, brilliantly summarized by Hubspot, is “ to generate more than a dollar for every dollar spent on a marketing campaign. What is considered a ‹good ROI› varies based on the type of strategy, the distribution channels and the industry it belongs to ." Starting out aiming for a return of 5:1, 7:1 or 10:1 without having taken into account the tactics you intend to employ, the benchmarks and all the exclusivity factors of the project would make very little sense.
Dealing with marketing means dealing with return on investment . In the digital age, ROI is an indicator that marketers live with on a daily basis because it provides an estimate of the opportunity of the current expenditure and the goodness of the strategy, but also because it can be detected and monitored in real time , so as to make the right data-driven adjustments along the way.
Problem #1: Marketing ROI is scary
Despite the crucial importance of this indicator, only 35% of marketers consider it “ very important ” or “ extremely important ” to measure the ROI of their campaigns, and this is due to a myriad of reasons ranging from fear of failure to a lack of data or intelligence and analysis tools .
In reality, the main problem is that ROI is scary. It is in fact a cold, objective and unblemished indication of the effectiveness of one's strategies that, beyond the formula ROI = (net profit / total cost) x 100, is anything but trivial to calculate in a specific case. Or rather, it is in some cases, such as in the evaluation of the return on advertising activities in PPC (pay per click), but it becomes much more complex if at the center of digital marketing we place for example content such as blog posts, whose range of action is wider (also in terms of duration) than an advertising campaign.
For example, a campaign structured in 10 posts can generate a certain amount of leads that, duly accompanied within the funnel, transform into 3 sales. But what timeframe should we consider? And, above all, what value should we attribute (in terms of ROI) to the growth of the audience over time and to intangible elements such as increased trust in the brand?
While there are specific formulas and calculators scattered around the web , it is clear that the ROI on content marketing goes beyond the short-term purchase, regardless of the effectiveness of the funnel, and it is no coincidence that the Content Marketing Institute suggests introducing non-financial factors into the ROI, such as the growth of engagement on the various channels.
How to Calculate ROI: Factors Not to Ignore
Given all that has been said, and therefore also the whole discussion of intangible elements, Hubspot reports a generic formula for marketing ROI, namely:
[((number of leads x lead/customer ratio x average sales price) – AD cost or budget) ÷ AD cost or budget
The formula is relatively simple and involves tracking a few indicators such as leads generated, lead/customer ratio and costs. It is also applicable to multimedia content , email marketing, ADV, social media promotion and much more. Be careful not to trivialize it, however, because even just quantifying the costs can hide complexities.
Costs and expense items
The main challenge is to be able to identify and break down the various finland whatsapp number data 5 million expense items , from advertising to content creation, to distribution and management costs. Consider, for example, production costs: they include the time needed to create the single content, those to review and publish it, those related to the various automations of the sales funnel, perhaps those of the connected landing page and the study of the data aimed at perfecting the underlying strategy.
There is nothing trivial about any of this.
Quantifying the benefits
The same goes for gains , which, as mentioned, do not necessarily have a direct financial impact. The indicators to start with are obviously sales growth, customer lifetime value, and new acquisitions. Metrics like conversion rate and average order value give marketers a clear view of how initiatives are contributing to financial results.
As mentioned, not everything can be expressed in financial terms. Marketing activities can significantly improve brand awareness, which positively influences purchasing decisions and is therefore a critical factor in calculating ROI. Consumer trust and brand loyalty must also be assessed, other consequences of well-structured marketing activities. Measuring the Net Promoter Score (NPS) and the churn rate give an idea of the emotional impact of marketing initiatives.
What matters, within this scenario, is finding a balance between quantifiable elements, precise formulas and qualitative aspects . Calculators exist and are essential to direct the investment correctly, but the emotional impact that marketing activities can have on the potential customer must not be overlooked, since they translate, indirectly but no less significantly, into the company's business results.