The most important parts of a marketing campaign are its performance and impact. We all invest in marketing to further business goals, so you always need to determine whether your efforts are helping your company’s bottom line. As a marketing tactic, product sampling is not immune to this need to measure and quantify impact.
Many clients we work with come to sampling channels with a brief focused on meeting business goals, especially around sales and revenue. For example, when we first began working with Tommy Hilfiger, they wanted to drive awareness and sales uplift for their newly launched fragrance on ASOS.com. With this in mind, we designed and delivered a sampling campaign that resulted in a +214% sales uplift for their entire product line.
‘Excellent’, we hear you cry, ‘Product sampling is proven to help ROI’! But our ability to quantify success with Tommy Hilfiger has stemmed from a close working relationship and access to the right data. Too often, we find that clients don’t realise that the power to calculate sales impact and return on their investment is in their own hands, not their partners! Marketing ROI itself hinges on determining the relationship between marketing and sales, so whether you’re looking at the impact of product sampling or other channels like event marketing or even social media buzz from user-generated content, determining ROI is already in your (or your CRM’s) hands.
With no further ado, let’s get into what Marketing ROI is and why it’s so important for many marketers to understand their work’s impact.
What is Marketing ROI?
Marketing Return on Investment (ROI) is a metric used to determine the effectiveness of marketing campaigns based on initial investment and results. It tells you how much revenue you generate for every pound you spend on marketing efforts. A high ROI indicates your activity or campaign was effective, as it drove more sales than it cost to do.
In simple terms, Marketing ROI answers the question of ‘what does the business get from this activity?’ Ultimately, it shows whether your activities succeeded or failed in convincing your customers to convert.
By calculating the return on marketing investment, organisations can measure the degree to which marketing efforts, either by activity, campaign or time period, actually contributed to revenue growth. You can use this metric to determine whether individual ads, entire marketing campaigns, or your yearly calendar has paid off by boosting sales revenue.
Why is Marketing ROI Important?
Calculating marketing ROI isn’t just about tracking numbers; it’s about unlocking a treasure trove of insights that fuel smarter strategies. By wielding this data, businesses can optimise resource allocation, make informed budget decisions, and propel their marketing efforts to new heights.
1. Informs Campaign Planning
Solid campaign planning starts with understanding your goals, budget, and the most effective channels to reach your target audience. Marketing ROI benchmarks help you set realistic targets and craft a multi-channel marketing mix that maximises your return. By leveraging past ROI results, you can make smarter decisions and achieve greater success. Previous ROI learnings from past campaigns can inform your current strategy, allow you to allocate resources more efficiently and target the right audience with the right message at the right time.
2. Enables Data-Driven Optimization
Marketing ROI empowers you to identify your marketing superstar activities and pinpoint areas for improvement. You can refine your tactics, identify high-performing channels, invest more resources, and refine underperforming tactics to get them back on track. By tracking ROI, you can measure the effectiveness of individual campaigns and establish benchmarks to gauge future success.
3. Demonstrates Value
Marketing ROI connects your marketing activities to the bigger picture – your overall business objectives. It allows you to showcase the tangible impact marketing has on revenue and profitability, solidifying its value proposition to stakeholders. With ROI data in hand, you can secure the budget and resources needed to propel future initiatives. WebsiteBuilderExpert has shown that marketers who consistently track ROI are 1.6 times more likely to land budget increases than other marketers.
4. Benchmarks Your Performance
Marketing ROI isn’t just about your performance; it can also be a valuable tool for understanding your competitive landscape. By tracking competitors’ marketing ROI (through publicly available data and financial statements), you can estimate their performance and adjust your strategies accordingly. This allows you to stay ahead of the curve and ensure your marketing efforts remain competitive within your industry.
Calculating Marketing ROI
In theory, calculating Marketing ROI should be easy. You get the necessary data from the multiple reporting and tracking tools you have access to to determine the sales driven, then divide this by your cost. Then you have a metric to stop your boss and/or stakeholders breathing down your neck, right?
While formulas for calculating marketing ROI can seem straightforward, it’s crucial to delve deeper to glean the most valuable insights. Classic formulas can be limited, as attributing revenue solely to marketing efforts is often challenging; for example, sales activities often play a part in a customer’s final journey stages.
Even without further marketing metrics included, a robust ROI measurement should consider various metrics like revenue/bookings, cost per acquisition (CPA), sales cycle days, and customer lifetime value (CLTV). These metrics provide a holistic view of marketing’s impact, from attracting new customers to fostering long-term relationships.
Businesses unlock a treasure trove of insights by understanding and effectively measuring marketing ROI. These insights empower them to make data-driven decisions, optimise marketing strategies, and ultimately drive sustainable growth.
The future of marketing ROI is bright, with emerging trends and technologies promising even more precise measurement capabilities. As we move forward, staying abreast of these advancements will be crucial for maximising the return on your marketing investment.
Ready to unlock the power of marketing ROI and propel your marketing efforts to new heights? Let’s discuss how we can help you implement a data-driven approach to measuring and optimising your marketing initiatives.
