Are you one of the many marketers that think the ultimate metric for measuring success is return on investment (ROI)? Measuring the effectiveness of your marketing is crucial, but many challenges come with calculating and relying on ROI. Moreover, ROI itself is not an indicator of effectiveness. That's ROMI.
ROMI, or the return on marginal investment, uses the change in ROI to determine the effectiveness of your marketing and inform your decision on whether you should invest more in a campaign (or not!). That said, ROI is needed to figure out ROMI, but it is not the 'ultimate metric' alone that too many marketers mistake it for today.
Here's what you need to know about ROI, ROMI, and the best marketing metrics for measuring success.
Is ROI the best metric?
Despite its popularity for being the best metric for measuring success, ROI is not the best metric when evaluated by itself. The problem with ROI is that the attribution models it is based on are often subjective, it's challenging to attribute leads to revenue, third-party cookies are on their way out, and customer lifetime value (CLV) is not constant.
Attribution Models Are Subjective
Most (75%) companies use some form of a multi-touch attribution model to measure their marketing performance. Although these models — or rules for attributing credits to marketing touchpoints in the customer journey — are popular for metric measuring, they're also subjective. The type of attribution model you implement into your strategy depends on personal opinion: which system you perceive to work best.
For instance, a Time Decay Attribution model would work best with a marketer that thinks some credit is due to all touchpoints in the customer journey but should 'decay' over time (touchpoints from further back get less than more recent touchpoints). On the other hand, a Linear Attribution model disperses equal credit throughout all touchpoints and interactions in the path to purchase.
In addition to its subjectivity, attributions can be extremely challenging to associate with the touchpoints in your social media and blog content.
Attributing Leads to Revenue
Not all leads convert into revenue-generating clients, and the ones that do can take months or years to convert, so it can be difficult to attribute what leads are generating what portion of your revenue. As if it wasn't complicated enough, special marketing tools are required to track an individual's buyer journey from lead to revenue-generating client, further increasing its difficulty.
The Death of the Third-Party Cookies
Google made its first announcement in 2021 (now delayed to 2024) that they were ending third-party cookies to give web users more control over their privacy. The problem this has caused for marketers is that the deprecation of third-party cookies makes it harder to measure ROI from various marketing channels. Although Google has continued to be receptive and allow time to adjust, there's no doubting the additional challenges this will cause for metric measuring in the future.
Integrating Brand Building
Brand awareness plays a crucial role in the success of your sales. However, it can often be tough to attribute brand awareness campaigns to the actual sales results they generate. The most common metrics used to measure your increase in brand awareness are impressions and search volume for branded terms. Although these metrics are often associated with vanity metrics because you can observe their impact on ROI almost immediately, the goal of a campaign changes that: if your goal is to increase brand awareness, these numbers are no longer considered vanity metrics.
What is a Vanity Metric?
Whether a metric can accurately be considered a vanity metric depends on your marketing campaign's goal. However, its simplest definition is a metric that can be shared with others to make you look good but does not add any real insight or understanding into the performance. So, if the metric can inform future decisions and strategies, it is not a vanity metric. It is a vanity metric if it does not offer reliable insight.
The key marketing metrics to use
When calculating your ROMI, the right marketing metric will depend on the marketing channels you plan to leverage and the campaign objectives you want to achieve. With that said, two metrics are always important:
If you're executing a customer acquisition campaign through e-mail marketing, however, you will need to measure the following as well:
And if lead generation is your marketing goal through content marketing campaigns, you might also consider measuring these key metrics:
Midwest Family South Bend: Measuring Marketing Campaign Success with ROMI
The only way to turn your information and insights into valuable data is to have the right metrics backing your evaluation. While ROI does contribute a lot to your overall understanding of your marketing effectiveness, it does not contribute as much alone. Using ROI to calculate ROMI is the key to your success.
And Midwest Family South Bend is your media partner solution.
If you want a marketing plan with measurable results and a focus on local, the best place to start is with a free marketing strategy consultation with Midwest Family South Bend. Reach out to our experts to get started!