There is no more important metric in a marketing organization than return on investment (ROI). If a marketing activity fails to bring in more revenue than it cost, then it cannot be justified; likewise, a marketing activity with a positive ROI is always a good idea, by definition. However, measuring ROI is not as straightforward as we in the marketing world would like it to be. There’s first point attribution, last point attribution, and all points in between, leading marketers to ask the question – which method of measuring ROI is the best?
A helpful analogy
When thinking about complicated systems like a marketing/sales operation at an enterprise-level business, analogies can sometimes be helpful. Imagine that you are a pilot sitting at the controls of a modern jumbo jet, and you want to assess the situation the plane is in. In front of you is a dizzying array of dials, gauges and indicators – much like the array of marketing metrics, dashboards and reports that indicate marketing and sales performance in a typical organization.
The equivalent of measuring ROI in this situation would be an equally key piece of information for the plane – such as your air speed. If this critical number dips below a certain level, the plane will stall and fall out of the sky (much like your ROI dropping below zero). Surely, in a state-of-the-art jetliner, the pilot is able to access a single, easy airspeed number to assess the situation?
If only it were that simple
Worryingly for those of us itching to get on a flight after Covid, the answer is no. There are many types of airspeed, and a pilot in such a situation may have to use as many as 3 different air speed measurements to get an accurate estimate of the situation. Complicating matters even further, as well as “air speed,” there is also “ground speed” to consider – a number many planes have to call down to air traffic control to ascertain, leading to some amusing anecdotes about ground speed one-upmanship amongst glory-hungry pilots.
All of which is to say – even basic critically-important questions such as “what was my marketing ROI” and “how fast is this plane going” do not and should not have simple answers. Both questions can be answered differently by measuring a complicated system in different ways. Instead of relying on a single number, astute marketers and pilots use multiple measurements to form a complete picture of the situation.
Multiple approaches, multiple ways
A great example of the utility of multiple measurements is comparing different marketing channels. Email, for example, only becomes relevant in the marketing journey after an email address has been given by the contact. This means that other marketing channels such as social media or pay-per-click will always look better than email in a first-touch attribution model, as they tend to feature more strongly at different stages of the customer journey. Using a last-touch attribution model alongside a first-touch model would show email in a more favorable light, leading to a more balanced evaluation by the marketing team.
By combining multiple approaches to revenue attribution and measuring it in multiple ways, marketers can gain a more complete understanding than if they rely on a single number.
And when it comes to ROI, knowing your numbers really is just as important as knowing how fast your plane is flying.
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Editor's note: Steve McConnell is a Marketing Automation Consultant at Sojourn Solutions based in London. He's recently completed his Oracle Eloqua Marketing 2021 Implementation Specialist certification (yay - congratulations!), and enjoys writing the occasional blog post.