In the previous article, we discussed why it is so important for marketers to quantify their marketing efforts during the ROI analysis. Today, we will have a look at some of the tactics you can use to improve ROI.
We prepared a short guideline on how you can optimize your ROI analysis by improving marketing efforts in 4 easy steps.
4 steps on how you can optimize your marketing ROI:
1. Analyse the outcome of past marketing efforts during ROI analysis
At this stage, it is important to define which marketing activities showed positive returns and which efforts did not add any value. Marketing activities which were not that valuable can be reduced. This step should be carried out during the regular ROI analysis.
Marketers should pay attention to this in order to improve the ROI and prevent further financial loss.
Luckily, modern technology and analytics make it much easier to conduct a detailed and qualitative ROI analysis. Such technologies help to analyse the performance of each marketing activity. Nowadays, most of the marketing KPIs can be measured on a daily basis, which makes it much easier to analyse the effect of each indicator on the marketing ROI.
As a result, regular analysis can help marketers to improve the ROI by allocating efforts in the future to intensify growth or cut expenses.
2. Analyse the external environment: competition and opportunities
This stage of ROI analysis involves competition-examination as well as noting the markets where significant growth is possible (opportunities).
Of course, it is not that easy to analyse the competitors and their performance.
However, it is possible to monitor most competitors’ results and activities with regard to advertising and price promotion. Sometimes financial data is publicly available. In this case, marketers can analyse their competitor’s marketing ROI. This can help to create a thorough image of the main strengths and weaknesses of the competitors and their strategies. The competitor’s ROI analysis should be conducted in addition to the regular one.
As it was mentioned before, in order to improve the ROI, the main opportunities should also be analysed. This step should also be considered during the ROI analysis.
Marketing is an industry where everything changes really fast and you will need to stay updated on the most important trends and innovations. For example, the growing popularity of artificial intelligence has an impact on the marketing industry.
Predictive analytics algorithms can now improve the procedure of forecasting seasonal trends. As an example, AI technologies can help marketers to anticipate the frequency of purchase and consumption depending on the season. Having this in mind, a marketer can plan their strategy more efficiently. As a result, it can help to cut costs and improve ROI.
Simple correlation analysis can also help to identify interesting trends and patterns between indicators. It can also be helpful for ROI analysis as well. By identifying such patterns, new opportunities for marketing activities can be identified.
In addition, it is always important to identify where the greatest opportunities lie. It can depend on current trends or tendencies. After defining such opportunities, the company’s resources can then be adequately allocated to boost further growth.
3. Reallocate marketing resources to seize new opportunities
This is one of the most crucial stages of ROI analysis. After the internal and external analyses are conducted, it is then important to reallocate marketing resources efficiently.
Unfortunately, many companies count on ineffective ways of allocating resources. Most of the time, the decision is simply made based on the results of the previous year: for instance, the best department gets more funding. Both of these methods are ineffective since they are not based on data.
That is why the decision regarding the allocation of resources should be made on the basis of a data-driven ROI analysis.
4. Make sure there is transparency and responsibility in each marketing activity
Last but not least – the importance of accountability. After a detailed ROI analysis is done in order to improve marketing performance, it is crucial to set the correct and relevant goals as well as KPIs for employees.
Most of the time it can be really hard to estimate the effectiveness of marketing campaigns during ROI analysis. That is why many companies tend to estimate the effectiveness of their marketing performance by looking solely at sales, which of course do not reflect the marketing efforts and have nothing to do with the marketing ROI. In the end, this can lead to problems when it comes to resource allocation in the future. Moreover, it can affect the employees’ motivation.
It is crucial for marketers to define clear goals and key performance indicators (KPIs). Do not forget that the goals should be SMART: specific, measurable, achievable, realistic and timely. SMART goals should be set for each marketing activity.
Only after that should the marketing tasks be assigned. As soon as the goal is reached, responsible employees should be rewarded. It might sound very easy but, unfortunately, many companies forget about that. However, it is important to keep employees engaged and motivated.
Hope this information was useful and you can now implement these easy techniques in your marketing strategy to improve your marketing ROI!
With ROI tracking marketers can achieve better results
Why is it important to track your ROI ?
ROI tracking can be challenging at times, but it might also be the most important part of the decision-making process. Making business decisions requires a lot of backtracking. Therefore, you need to analyze your performance and understand which initiatives had a positive outcome and which had a negative one. Thanks to today’s technological advances, it is possible to track and measure every stage of the customer journey.
Keep this in mind: Hindsight will help you identify where to focus your time and effort. A good ROI tracking will allow you to optimize your marketing ROI correctly.
Let’s start now!
To optimize your marketing ROI, here are some basic principles that you should be prepared to tackle:
1. What are your marketing goals?
In most cases, the main targets you want to reach are awareness, engagement and conversion. But be cautious, select only one goal for each campaign!
Alongside you might also ask the following questions: Who knows your brand? Who is your target audience? And finally, who are your buyers? These questions will help you clarify your tasks and more accurately assess your timing. There is a specific framework you can follow step by step if you are hesitant about setting goals, it is called: Objective and Key Results framework, which leads us to our second question.
2. Am I using the right tracking metrics for each channel ?
Marketers sometimes also do not know precisely which metric to use while ROI tracking. We will go through a few below ! Therefore, if you want to dive deeper into details and find which one is more relevant to your marketing goal, we have written another article about marketing KPIs that you might find helpful.
Unique monthly visitors
As its name implies, this measurement unit indicates precisely how many different visitors have been to your website within a month. Since many digital marketing tactics are designed to generate more traffic, this is one of the basic metrics you can track.
Traffic (per channel)
A second useful metric is to compare the traffic generated by different streams. This will provide you with an overview of which channels or efforts are generating the most traffic.
Perhaps the most valuable information, after all, is the percentage of generated traffic that ultimately turns into paying customers. You can evaluate it by exploring what percentage of the traffic generated by a channel has actually been converted. Your ROI tracking must be most particularly focused on the channel that makes the more conversions.
3. Do I have sufficient data to make a decision ?
You may be a small business and have little or no data over multiple months or exactly the opposite. For this reason, the most important thing is to set a time frame for analysis. It can be on a weekly or monthly basis, there is no such thing as a right or wrong method: choose your own and stick to it.
Quick reminder: Return on Investment (ROI) is a financial ratio used to calculate the profit in proportion to the cost of its investment. There are variants of the ROI formula. The two most commonly used ROI examples of formulas are listed below:
ROI = Net Income / Cost of Investment or ROI = Investment Gain / Investment Base
However, you can also use the key performance indicators we discussed earlier, such as:
ROI = Conversions / AdSpend
Here is an ROI example, mr.Applepie sells boxes for $3 each. At the end of one month, mr.Applepie has made 10 conversions on Facebook for $30. But to generate these conversions, he spent $60 on FacebookAds over the whole month.
ROI = 30 / 60
ROI = 0.5
For those who find percentages more striking, in this case, and use the investment gain formula:
ROI = ((60 – 30) / 30) x 100
ROI = -50%
The result is negative here, next time mr.Applepie will follow our guide to optimize his ROI.
Be careful with your return on investment interpretation
We discussed the ratios above, remember ? Mr.Applepie had a ratio of 1:2, which means he lost twice as much as he gained. But even if the inverse had happened, a 2:1 ratio would not be profitable for many companies, most notably for smaller ones. So once more: be cautious in your return on investment interpretation !
If mr.Applepie spends $100 on ads to generate $200 in sales, and it costs him $100 to make the boxes, he breaks even. Mr.Applepie may as well not do it, or actually start following our guide. Hence why analytics are powerful when you want to optimize your marketing ROI !