The Importance of Marketing Analytics
In order to determine whether or not something is working, you need to be able to measure it…and that means you need the right data. Ask yourself…which of your marketing initiatives are working? Good marketing analytics require data from all marketing channels – web, social, email, blogs, reviews, etc. – and the ability to report and act on that data. The key to all this is finding the right tools.
Don’t feel intimidated or out-of-the-loop – few marketers would admit to having a firm grip on their analytics. Indeed, marketing efforts often are, by their very nature, hard to quantify in terms of dollars, revenue or impact. What’s more, they tend to result in “feelings of customer direction” or “impressions of behaviour” – what we can be called a “brand sentiment” – more than actual dollar signs.
“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” John Wanamaker (1838-1922)
Great Marketing KPIs: ROAS & ROI
ROAS and ROI are great marketing KPI’s because they relate to marketing’s impact on the businesses in easily digestible metrics that business leaders can take action on.
ROAS, or Return On Ad Spend, is a marketing analytics metric that describes marketing channel return. You calculate it by taking revenue from that channel and dividing by cost. That will give you a multiplier: how many dollars in revenue you get for $1 in of marketing using that channel. Most businesses will want 2-20X revenue for marketing dollars spent. In some highly profitable, but competitive markets, lower ROAS such as 1.5X may be acceptable, while markets with razor thin margins will demand higher ROAS ratios. This marketing metric allows comparisons to be made between channels, campaigns, and even deeper as long as you have enough data to make it significant. In most businesses, where marketing drives sales and revenue, ROAS is a useful and simple KPI to watch. $2000 revenue on $400 of spend would give a ROAS of 5X
ROI or Return On Investment, is slightly different than ROAS. To calculate ROI, you take (profits – costs) over cost. ROI is commonly given as a %. Rather than a multiplier, ROI shows the incremental lift you get from marketing. Anything positive means we’re making money. $2000 of revenue on a product with 30% margin with $400 of spend would give an ROI of 50%. Because ROI represents profitability for most companies,
Note: some marketing groups will choose to report using revenue, while others will report using profitability. Profitability is preferred, but there are some scenarios where pure revenue growth may be the goal.
CEOs of companies are demanding more quantifiable and tangible metrics from their marketing departments or external agencies, with six in 10 professionals reporting feeling rising pressure from upper management to be more data-driven. As a result of rising demand, there has been a swooping emergence of tools, technologies and scores in the past year designed to assist marketers determine their impact.
The average marketer, despite insistent efforts to invest in marketing analytics, still struggles to ascertain which metrics to actually track; they’re usually searching for answers to questions like:
- Which analytics should I track?
- What makes different technologies…different?
- What’s available on the market?
- How do these technologies integrate with my current marketing approach?
In helping you navigate these rough seas, here’s a quick look at some of the most powerful tools in marketing analytics:
Measuring the Effectiveness of Your Website – As with anything, marketing agency analytics starts at the beginning, or foundation. A professional, up-to-date marketing entity that’s revenue impact tracking-ready needs four elements: A formidable marketing automation software platform, a robust CRM system, a content marketing production space and a web presence tracking tool.
Measuring the Impact of Your Content Marketing – Next, you should be using technology to tie revenue to individual content pieces; many tools available for this task take a granular look at the effects of a singular marketing deliverable to revenue. They could tell you, as an example, the amount of revenue a single blog post or tweet contributed to the business as a whole.
Marketing ROI Planning – Major data creates a plethora of numbers, so knowing how to tap into the right major data defines the differences between businesses that succeed and businesses that crash. Plenty of tools exist to help you create ROI (Return on Investment) plans while leveraging so-called big data.
At a time when marketing is being measured more directly against top-line revenues, the decision to predict what prospects are likely to do next is critical.