The 5 Levels of Measuring Marketing ROI (Part 2/2)
As discussed in part 1, there are different levels of sophistication when it comes to measuring the success of marketing campaigns and the complexity increases as you move from one level to the next. In part 2, we’re going to look into the details of how the tracking setup works at each level and what a proper setup looks like from a high-level:
Level 3: Sales/ROI
We find that very few clients are able to accurately determine how many sales can be tied back to their online ad campaigns, as answering that question requires a fairly complex tracking setup to determine which sales came from your marketing campaign versus other sources. However, until you are able to clearly understand the number of sales that your marketing campaign drove, you can’t accurately determine what your campaign budget should be, as the same campaign that is driving you hundreds of leads may be driving low sales and actually be harming your business economics. When your tracking is focused around sales & ROI, then you can make intelligent marketing decisions and operate at a level above most of your competition. However, level 3 does not tell the full story, so let’s see what more we can consider in level 4.
On the surface, level 3 does enable us to answer the question: “Is this marketing campaign making me more money than it is costing me?”, but only from a short-term perspective. For most businesses, customers don’t just make single purchases, but rather become repeat purchasers, patronizing your business many times in the future. For this reason, to determine whether your ad campaigns have been ROI positive long-term, you need a way to calculate the lifetime value of your customers.
Level 4: Customer Lifetime Value
It is worth noting that while level 3 can take you pretty far, if you don’t make the jump to level 4, you may still make improper decisions about how much budget to allocate to your campaigns. For example, a client may find that based on the level 3 data, their marketing campaigns appear unprofitable and decide to cut them entirely, but had they looked at the buying cycle over a longer horizon, it would have been evident that the campaigns were ROI positive and should have been continued. Level 4 does a great job of determining the success of your overall marketing strategy, but if you are running a lot of ads and want to go deeper into measuring the success of specific marketing tactics that are contributing to success, that is where level 5 comes in.
So you have gotten your measurement capabilities to level 4 and recognize that your campaigns are profitable. You are running ads across more and more channels. The next reasonable question is, “What about my approach led to that success and how can I continue to improve performance?” It’s normal in a marketing campaign to have a multi-pronged strategy, such as running ads on Google, Bing, Facebook, and LinkedIn as well as to engage in tactics that target buyers at different stages of the funnel (e.g. Display ads on Facebook and LinkedIn to hit buyers early in their journey, Search ads to engage them later, and Remarketing ads across the web to close them).
Level 5: Data Driven Attribution + Re-Starting the Loop
When you start running a cross-channel and cross-tactic campaign, multiple ads will likely play a part in driving every lead and sale, so you’ll need to determine which of them was responsible for driving the lead. The most common model to attribute credit is “Last Click”, where the last ad a user clicked on is given 100% of the credit for that lead or sale, but this has some obvious flaws (e.g. if a user clicked on 6 of my ads and then purchased after the last ad click, was that last ad 100% responsible for the purchase decision?). There are plenty of other models such as “First Click”, “Position-Based”, and “Data-Driven” (a custom model developed through AI) that can help you in improving your attribution strategy.
Finally, there is the matter of making your insights actionable. If you get to level 4, you might know within your CRM system that for a Google Ads campaign, each sale came from a specific Campaign, Keyword, and Ad, however, when you look back into the Google Ads platform (where the campaign changes are ultimately made), all you are able to see is what tactics led to leads. In order to be able to feed the data from your CRM system back into Google Ads, you will need to set up a connection between the two platforms using some code. While this takes some time and technical know-how to do, it enables more intelligent decisioning by your ad platform about how to tweak your marketing campaigns for maximum success in a way that would be otherwise impossible.
In conclusion, the question of “How do I measure the success of my marketing campaigns?” is represented by a series of steps distinguished by their sophistication and complexity. As you continue to improve your tracking and ability to measure results, your decision-making improves in lock-step, and you are able to run marketing campaigns with significantly better performance as the system can leverage the actionable data you provide it.