A successful marketing plan is the sum of many parts. You need a winning product or service of course, and a team of talented individuals to make it happen. Key elements to creating a highly successful marketing plan also include a market analysis, target audience insights, strong brand positioning, clear business goals, communication strategies and the ability to measure performance. Additionally, if you don’t understand the importance of marketing ROI, your chances of success could be limited.
What Is Your Marketing Plan ROI?
Marketing ROI is used to create a better understanding of the marketing campaigns and tactics that work and don’t work for your brand.
Answering questions related to budget-spend versus ROI creates accountability on your part and reveals how well or how poorly your marketing strategies are performing.
Marketing ROI should focus on improving your marketing activities so they better align with your company’s strategic goals, not just your marketing objectives. Making sure those metrics resonate within your company and support your business drivers will create further transparency and clarity around your marketing efforts.
Here’s the very basic equation companies use to measure a marketing campaign’s ROI:
ROI = (Revenue – Marketing Investment) / Marketing Investment
The 3 Benefits of Using ROI to Fuel Your Marketing Plan
We’ve already covered the most obvious benefit of focusing on ROI when creating a marketing plan: it helps ensure you see positive returns and it helps you to course-correct when you don’t.
However, that’s not the only reason it pays to consider ROI when developing your marketing plan. Here are three more:
1. Prioritizing ROI Means Prioritizing Accountability
Most companies marketing plans feature a number of moving parts. This means that numerous strategies, agencies and tactics can be responsible for a brand’s marketing success.
Sure, it’s excellent to see positive financial returns, but it’s often difficult to repeat those results – much less improve on them – if you don’t know what was responsible for the success.
If this sounds familiar, you’re not alone.
According to the Nielsen 2018 CMO Report, only 1-in-4 marketers are highly-confident they can quantify ROI and, what’s more, 79% of respondents reported that they plan to invest more in their attribution tools and analytics, so they know where their biggest wins are coming from – and where they can cut their losses.
For example, it might look like pay-per-click (PPC) ads are delivering the best results for your business because they result in the most conversions; yet, you might find through further analysis that although your content marketing produces fewer conversions, those customers that do convert lead to much larger returns.
It’s thus important to consider ROI when evaluating the results of each marketing program so you can feel confident in the performance of individual strategies and tactics.
2. Prioritizing ROI Means Setting Expectations for What Can Actually Be Measured
As they say, what gets measured gets improved. As marketers, if we can quantify current performance then we can measure how programs are contributing to growth over a period of time.
For example, we often need to explain how writing blogs for our company website or running a product giveaway on Instagram contributes to growth. Well, if an ROI-centric approach is taken, then we start by identifying the proper key performance indicators (KPIs) as a first step toward measurable improvement. Since each marketing tactic must ladder up to a greater marketing strategy, and, ultimately, a higher business goal with financial impact, it’s important to determine how each activity contributes to the broader objectives, which activities can actually be measured effectively and how they will be measured. Once it’s clear how each marketing tactic will be measured, we are one step closer to understanding the full marketing plan’s return on investment.
3. Prioritizing ROI Means Using Benchmarks to Set Realistic Goals
This is all about using the data you already have to develop metrics for success, track and optimize along the way. Look at things like Google Analytics, social and sharing metrics, audience and shopper data, sales and/or retailer data, and even 3rd party syndicated data to inform your goals and strategies.
If you’re lacking any of that information, you can pursue quantitative and qualitative research techniques to gather the data.
The bottom line is that taking an ROI-based approach means using and evaluating existing data to inform your marketing strategies and measure their effectiveness.
Once you have this ROI approach set up, you can look to build an attribution model for the future of your business. An attribution model quantifies the sales impact of your marketing activities. Based on your past marketing spend and sales, attribution modeling can help you optimize your future spend and maximize your return on investment.
Start with ROI to Improve Your Marketing Plan
Having an ROI based approach to marketing planning is the best way you can be sure to know what strategies and tactics are working to increase profitability and growth.
Otherwise, you’re most likely just using intuition and educated guesses to account for performance – rather than a winning approach based on real data.