Return on Investment (ROI) for the digital marketing manager

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Marketing and advertising managers need to understand that their business owners and financial colleagues are – first and foremost – risk-averse. So while they give you budget to grow their business, they really see you as the ones taking their capital and putting it at the greatest risk of loss.

Lose too much, too often, and you’ll lose your job.

On the other hand, like a successful financial advisor, if your track record is growth over the long-term, then you gain their trust and more funds to invest.  As long as you provide overall financial growth as their Return on Investment, those that control your purse strings will understand that sometimes campaigns don’t work and loose money, and some just return enough Contribution Margin to break-even and preserve capital.

So for digital marketers in Small and Medium Businesses’ (those with sales less than $50 million), here’s the first dilemma. We know that building brand awareness is important to the process, but we often do not have the budget to measure and report any ROI.

Even other benchmarks like number of followers, page visits, click through rates, cost per acquisition, and cost per thousand are just market indicators. They’re useful to us, but don’t trump Bottom Line Metrics when evaluating our track record. We need to produce more customers, sales revenue, and net profit.

Take heart. Some of the fundamental advantages of digital advertising also provide solutions.

Long-term commitments to Digital Display and SEO provide tools to manage those investments better than in print or broadcast.

1. Digital Display and SEO are a continuous flow of campaign dollars (not a series of single jolts like sending the mail or publishing the ad). Like Wall Street analysts, we can continuously monitor our invested dollars; e.g., opens and completed actions (such as online orders or forms submitted), and adjust our next spends accordingly.

2. A real-world case study by Harvard Business School Professor Sunil Guptai (1) – a leading researcher of how digital technology is changing consumer behavior, transforming businesses and influencing society – had important conclusions bearing on ROI.

Gupta and his group studied a commercial bank’s efforts to gain new checking account customers through combined campaigns of Display and SEO. They broke down results and attributed revenues and costs to both campaigns.

They concluded:

  • Display supports Search: a sustained increase in display impressions drives a significant increase in search visitation and search clicks.
  • When the long-run dynamics of Display and Search campaigns were reviewed, the ROI were better – about 10% and 38% higher respectively.

All of that’s well and good for big banks with money to spend on attribution research, but how can we apply this knowledge to our tasks at SMB’s?

Part of it’s perception – manage how you are viewed by others.

1. Recognize your role as an investment manager of your company’s working capital for business development.

2. All members of your advertising and marketing team are facing increasing pressure to produce results. So develop a culture with them that thrives on creativity, but understands that the company has entrusted all of you with its working capital.

3. Reach out to your business owners and financial colleagues, and convey that perspective to them. Let them know that you are working to increase Contribution Margin for the company as a result of your campaigns. (What others do with the money after that is outside your control, but you’re a team player).

And part of it’s reality – manage how you use the funds entrusted to you.

1. Remember that Display has significant impact on your Search results. So allocate enough funds to Display to have an impact.

2. Make sure you’re excluding the search engines’ display networks from these display buys so you actually serve ads to audiences based on behaviors, not search histories.

Not only will this properly leverage the investment for better results for Search, it satisfies the dilemma to grow brand awareness to a wide audience.

3. Ask for reports from your financial colleagues that compare year-over-year results (last year compared to this year). Monthly and quarterly comparisons will help you gauge how your investments are doing.

The results of your organization – including yours – are measured in dollars. That’s where Return on Investment will help you develop your brand as not just the marketing genius you are, but as the trusted financial advisor who leverages the company’s working capital.

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(1) “Do Display Ads Influence Search? Attribution and Dynamics in Online Advertising”, Working Paper 13-070, Sunil Gupta, Pavel Kireyev, Koen Pauwels, February 9, 2013, http://www.hbs.edu/faculty/Publication%20Files/13-070.pdf.

Bottom line metrics

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Finding tangible evidence that what we do works (or doesn’t) is key to performance improvement.

So we look for metrics to gauge our results.

How many times have you heard (or believed yourself) any of the following as metrics that show your marketing dollars are well spent?

Look at all the tweets/friends/followers our Social Media is getting, and the numbers are growing.

Our organic page visits are going through the roof, so our SEO and blogging is working.

Our online display ad buys are driving people to our Contact Us page, and we’re getting more initial contacts then ever before.

And the two corollaries:

  1. We’re getting increasing numbers for the same or lower cost, so the Social Media/SEO/Display Ad tactic is improving its efficiency.
  2. We can increase our results by devoting more of our budget at the more efficient rate.

Metrics like that are indicators – benchmarks – of how we’re doing as marketers, and not how the business itself is doing.

And while they’re important benchmarks to us, too often we loose track of the real process, namely bringing in Sales Revenue at the top line and ending up with Net Profit on the bottom line.

If our marketing dollars don’t produce top line sales and help generate bottom line results, we should take a hard look at the mix of our spending.

As marketers, here are some Bottom Line Metrics that measure what we’re doing to advance the company’s business:

Are we gaining more customers to grow our Sales Revenue?

Or are we selling more products to the same (or fewer) customers?

Or are we increasing our revenues due to price increases?

What is the cost of acquiring those customers?

Even the cost of customer acquisition could go up or down, and not tell the whole story. So we also should know if our Contribution Margin is increasing or decreasing as a percentage of total Sales Revenue. (CM = total cost of all marketing expenses/total sales revenue)

When you can increase marketing spending with a resultant increase in Sales and decrease the CM percentage, then you’re contributing to both Top Line Sales and Bottom Line Profit.

What’s the Lifetime Value of our (new) customers?

Are your customers “one and done” or do they return to buy again?

Keep an eye on your Bottom Line Metrics, and gain as much knowledge as you can about your repeat buyers. They’re the ones that will sustain your business.