Marketer’s Challenge — Measuring ROI and effectiveness of Marketing Campaign
I have been asked this question by many marketers and students. How to track marketing ROI and make sure the marketing efforts are effective? This is a very tricky question considering companies nowadays have Marketing Strategies that are omni-channel. Example — Online, offline, mobile, referrals. The products and services sold are also through multiple channels. For example, you want to recharge your mobile. You can do it either by recharging on your telecom operator’s website or mobile app or third party vendors like wallets, coupons or go to a physical store near you. There are numerous touch points and tracking effectiveness across channels can be nightmare. In this article I will attempt to guide budding marketers how they can track their campaigns across multiple channels. I have used Six Sigma principles to articulate the process to track effectiveness and calculating ROI.
- Define the Objectives for each Channel
2. Measure the conversion ratios and leads from a channel
3. Analyse the revenue generated and ROI of the campaign
4. Improve the quality of tracking
5. Control and optimize the costs
First: Define the Objectives for each Channel
Define your objective and KPIs(Key Performance Indicators) for the objectives across channels. Have specific targets based on the channels you are using in your Marketing Plan. Define the metrics how you will measure the effectiveness and target achievement for each campaign’s KPIs.
KPIs can be one or combination of below,
- Reach — Number of the eyeballs or customers your campaign is reaching
- Virality — What is the uncontrolled chain reaction your campaign is creating
- Recall — When there is a need for customer, is your product coming to his/her mind
- Positioning — How customers perceive your product or service
- Visits — Number of visitors your Point of Sale i.e. Website, Store, App, Phone, etc is able to garner
- Acquisition — Number of new customers the campaign got
- Referrals — Successful customers referred by your existing customers, NPS also can be a metric in this
- Engagement — How much time your customers spend in your platforms
- Retention — How many of your previous customers are coming back
- Sales — Last but most important and how much your company is making
Setting Relevant objectives and KPIs
Depending on the nature of your product or service define your objectives.
Metrics for measuring KPIs
Below metrics can be used to measure your KPIs. Specific metrics should be built depending on your product or service.
Objectives of marketing can be categorized into broadly two segments,
- Brand awareness
This type of ad will create awareness about the product or service in consumer’s mind. Consumer will get familiarized with the product. Direct sales or conversion will not be the objective of these campaigns. The messaging will also be more emotional creating a bond between customers and brand. Example Maggie Noodles — It transformed from a two minute noodles to a product used by generations and Maggie noodle lovers. This transition can be seen in their ad messaging which can be searched in Google or Youtube.
In online it can be a CPM campaign where conversions are not important. In offline it can be any ATL/BTL activities which only engages the customer and brings the product into his mindspace.
KPIs — Reach, Virality, Customer recall, Brand Positioning, Engagement
This type of Marketing Campaigns focus purely on sales. The customers are enticed to buy or use. The messaging can be either functional or emotional. It will prompt the customer to take decision quickly. Continuing with the same example Maggie portrayed itself as a easy cook meal which intends the customer to try it next time they want to save time and have a quick meal. It tagged itself as a 2 min noodle.
In online acquisition campaigns can CPI, look alike, links leading to sales or registration or subscription in website. In offline it is promotions targeting purchase.
KPIs — Acqusition numbers, Referrals, Retention, Sales
Second: Measure the conversion ratios and leads from a channel
In general tracking of Marketing campaigns performance in offline is very difficult and inaccurate. Only a directional sense can be achieved from tracking offline activities. This lack of ability to track and opaqueness of the offline ecosystem has made it less preferable for startups. Have a look at my previous article to get a sense of trackability in each channel.
Offline — Non Trackable
These are the channels where you promote and cannot track the target audience. The metrics that can found are it’s reach and approximate acquisition of customers. Though we can attempt to calculate the ROI by forecasting or control group studies or coupons, it cannot be generalized for future campaigns. The reach of the marketing channel could change or your messaging. Such studies can cost significant money and efforts. I would focus on estimating the reach of each channel. Media owners or agencies can give the reach of their channel. From my experience I have realized that the claimed reach is always exaggerated by at-least 50%. Hence, re-calibrate the reach and adjust it. Estimate the conversion from reach based on your previous experience.
• TV — 0.5% of reach
• Print — 1% of reach
• Radio — 1% of reach
• OOH — 0.5% of reach
• Pamphlet Distribution — 5% of reach
• SMS — 1% of reach
This majorly consists of activities that are high touch and you interact with the customer personally. You demonstrate your product or service to potential customers and get their information as your lead. Since the lead is trackable we can match him/her with the existing customer’s life cycle. From this we can estimate his lifetime revenue and additional income through the customer.
• 1to1 Promotion — 10% of reach
• Activations — 5% of reach
• Direct Calling — 5% of reach
• Email — 1% of reach
Online Non — Trackable
These will consist of brand awareness ads i.e. CPM ads and organic leads. The objective of the CPM ad is to create awareness. Reach will be the metric here, which the channel partner will provide. Organic leads are difficult to measure as the lead could have known about the service from any source including offline or online marketing. The only way to know about this will be to ask the customer, about the source during registration.
Online marketing has evolved into a point where it can track your every movement both physically and digitally. It has also raised a lot of privacy concerns. The two networks widely used are Google and Facebook. You can also get leads through 3rd party Ad Networks. I would focus on online services including both web and mobile ecosystem.
First and foremost it is important is to integrate analytics tools in you app or website. Do this as early as possible. Also start storing basic data you will need to analyse the performance of the company as well as customer. If major part of your Digital marketing is focused on Google, Facebook and Twitter for mobile app, integrate third party attribution analytics tools like Branch, Appsflyer, Tapstream, etc. This will help you identify the source of a lead. Google Analytics is free but can provide tracking of few 3rd party ad networks but not for Facebook and Twitter. Use CRM tools like Mixpanel, Clevertap or MoEngage which can help track user during his/her journey in your website or app. It can also provide the revenue generated as well. For website based product Google Analytics can provide the in-depth analysis needed through Goal Conversion.
Tip: If you have strong tech and analytics team, I would suggest to build your own CRM tool. Use the tool for day-to-day performance analysis as there are always inefficiencies in CRM tools.
Even if you don’t have the resource and requirement to use third party vendors, at-least use URL Shortener to identify the clicks from a particular source.
Third: Analyse the revenue generated and ROI of the campaign
The challenge to analyse revenue generated will be the nature of the product or service you are offering. It affects your revenue estimate from a customer. Check out the below examples,
High Priced: Eg: Foreign trip/ Laptop/ Mobile. After one purchase customers may not add value for next few months. You may be able sell accessories but revenue generated will be significantly lower. Total revenue will be Initial purchase + Accessories sales
Premium: Eg: House/Car. These customers would not think of similar purchase for next few months to years. It can be safely assumed as one time revenue.
Subscription Based: Customers pay a monthly premium. The duration can vary from a month to 2 or 3 years. If the service is liked by the customer they would extend the subscription. The revenue will be (total premium subscribed + Estimated retention — Estimated cancellation).
General Long term: Eg: Clothing/Accessories/Utensils.These are products that are lower priced and purchased again in few months. Semi Annual or Annual revenue from a customer would be appropriate measure depending on the purchase cycle.
General Short Term: Eg: FMCG products/Cab bookings/Dining. Customers make repeat purchase of these products. Annual revenue would be appropriate measure in this. The product life-cycle can also define the term.
How to calculate ROI?
Mathematically it can be defined as percentage of below,
The above formula has its limitations. It assumes all the effects of external factors like regulations, competition, good will, higher demand, etc can be measured and attributed. Marketing expense of a channel can be easily calculated from the spends on that channel. The tricky part will be calculating additional income from a channel. Any customer sourced from a channel has to be identified. Post this, revenue from that customer should be found through customer life-cycle study and digital tracking. It can also be estimated from control group studies, statistical studies or outsourcing to an experienced research agency.
Example (Assuming Annual Life cycle for a customer):
Number of leads emails sent to — 10,000
Frequency of emails sent annually— 10
Cost per email — ₹0.1
Cost per customer with 1% conversion — Rs.(10000*10*0.1)/(10000*1%)=Rs.100
Annual Revenue per customer — ₹500
Profit (assuming 20% margins) per customer — ₹200
ROI — (200–100)/100 = 100%
Fourth: Improve the quality of tracking
Below methods can be used to better identify leads from a less trackable source,
- Control group studies to identify conversion of specific channels
- Localized study of the channels in a smaller geography
- Coupon codes or vouchers that can be redeemed with customer details
- Email or phone number displayed in ad to get sale/offer/support
- Web-link/twitter hashtag to get more info
- QR code in pamphlets, posters and any other print ads
- Ask the customer for source of information during registration
Fifth: Control and optimize the costs
- Evaluate the campaigns performance monthly or quarterly. If the leads or feedback of the channel is poor, stop or re-calibrate the campaign.
- Conduct studies to identify the customer demographics and purchase appropriate media based on this
- Identify and explore newer and innovative channels
- Do not outsource wherever possible
- Invest efforts in improving SEO and ASO
- Improve organic reach through Blogs, Social media and partnerships
- Since online channels are quick to track, monitor the results weekly. Evaluate the campaigns every month and optimize your keywords, content and targeting.
- Do not go for 3rd party app installs if the objective is to get loyal customers. It can be used for awareness campaigns.
- Make good use of web and app notifications
- Emphasize on referral programs
- Do not outsource wherever possible
Please note, this is only a guide and not rule book. Always innovate, experiment and update the methods you are using.
Thanks a lot for your interest in the article. Like and share if you found this article useful. Connect me through LinkedIn if you want to get in touch.