email		print
	report

Related Tags

campaign   costs   data   marketing   measuring   methods   offline   sales   smm

Show all Tags

Like this topic?
Write Advice
Advice that links to this one

Re: How do you measure ROI
Asked by angieh

Question:

There seems to be a couple of different ways of measuring ROI for search engine optimisation and social media marketing. What would you personally recommend for calculating ROI on seo and smm?

My Article:

Angie,

that's a great question, here's two short answers plus a long one on some of the other things to consider.

1: As mentioned by others, the cost of the campaign vs what it brings in, in sales. Basically if it cost you more for the campaign than you make in sales you're going bankrupt.

Or:

2: Online marketing is still new, and smm even newer, and we're all still trying to figure out how to measure it. EG Facebook famously has never made a cent in ROI and is still desperately trying to figure out how to do so. (If they're having trouble where does that leave the rest of us?)

A Primer for ROI

The bottomline is always did the campaign bring in more sales than it cost you to run. The difficulties start in trying to figure out how you track sales.

At a basic level most analytics packages, including Google, allow you to track sales on the site and measure the conversion funnel from keywords, adwords, referers etc. They now even allow you to include sales from phones.

If you run any campaign you should see a spike in traffic fairly quickly ranging from 24 hours for an email campaign to about a month for SEO. Others may take longer, but in any event there should be an obvious spike in traffic and sales when a campaign is running. Even offline campaigns will show up as spikes in your web traffic analytics.

If there's no obvious spike then you can be pretty sure the campaign hasn't worked.

The other difficulties you will have in accurately measiring a campaign's effectiveness are many.

IE I know from long experience if customers get a marketing email, the first thing many of them do is pick up the phone or go to the fax to place the order. Still others may make the effort of going to the physical store. (They just like the personal experience.) The same applies to any form of online and offline marketing. Not everyone is going to buy online, but that doesn't make the campaign any less effective.

EG In the US it's been reported that 50% of people buying new cars have fully researched the car they want before they walk into the dealers showroom. They know exactly what model they want, what colour, what options and what they should pay for it. The only thing the salesperson has to do is get out of the way and accept the cheque.

Also, in Australia, as elsewhere, most leads in real estate are now coming via the web.

In both these examples the sale is completed offline, but the lead came online. Now any good salesperson will have methods for tracking their leads (it's in their interests). And all direct response marketers will have their ways and means of measuring all of their campaigns, but these are likely to be separate systems not integrated to the web.

In these instances you'll have to find some way of matching up the data, which usually means exporting data from seperate programs and importing them into a spreadsheet and doing some number crunching.

But this is getting into the area of what business analysts do, and maybe even the accounting department.

Another common problem you may find in larger businesses is that the retail manager may not want to share their customer data with the direct mail manager, and least of all the online manager. (But that's a whole 'nother issue.)

Then there's the area of customer aquisition cost and lifetime value as mentioned by others.

But it doesn't stop there. If your the sales or marketing director you will usually have a budget. Something like a 20 page or more document of spreadsheets and tables that lists all of the below the line production costs, business costs, staff support costs etc as well as any above the line costs such as marketing.

In other words, even if the campaign brings in more sales than it cost to run, it may still not cover the cost of actually producing the item and getting it to market.

Still other factors to consider are:

It's been calculated that for every dollar spent online, a further $25 is generated offline. (Boston Consulting Group.) Do you take that into account?

Then there's Paretto's Law (the 80/20 rule/) I prefer the 90/10 but let's stick with the popular version.

About 80% of your business will come from 20% of your customers. So, does the campaign bring in customers from the 80% percentile who don't spend much or the 20% who do?

Google Evangelist, Avinash Kaushik points out that there is no point in having a successful campaign that drives traffic to your site if no one buys when they get there or worse they don't come back for repeat visits.

In that instance the campaing may be successful, but it is let down by poor conversion factors on the site, or even the product itself.

All of the above of course, relates to sales, but what if the campaign and site aren't about generating sales?

There are the obvious methods of measuring if you got an increase in sign ups/registrations for a newsletter of service. Or did they download the document you wanted them to.

What if you are running for public office, then ultimately the measure would be: "Did he get elected President?" President Obama famously harnessed the power of the net and social media in his campaign, and plenty has been written about that elsewhere.

Or if you're a government department or lobby group, you could measure it by whether or not a certain piece of legislation was passed or blocked.

Many community groups, especially environmental groups, are very adept at using the net and social media to promote their cause.

These sorts of areas are where it gets more complex. You are starting to get into "Share of Conversation" and "Net Promoter" scores, influence and persuasion. which are whole other areas.

For more on those particular methods join me over at The Society for Word of Mouth Marketing, you'll find heaps of info on how to start measuring such areas.

Ok Angie and others, I've gone on a bit, but hopefully it'll be of some use and get you thinking.

Mark

Breakthrough Ecommerce