Measure Marketing Campaign ROI in 2024

Calculating marketing campaign ROI in 2024 is simple.

Measuring marketing campaign ROI in 2024 is supremely difficult.

Maximizing marketing campaign ROI in 2024 is the worthiest of goals.

I riffed on this while helping out a fellow marketer who posed this question on Quora. Here I’ll go into more detail.

Defining ROI

ROI is a simple ratio of two numbers:

profit from an investment divided by the cost of that investment.

Measuring the cost, investment and profit numbers mentioned above is what makes this hard.


Measuring The Inputs to Marketing Campaign ROI

Let’s start with costs of a marketing campaign. There are the direct costs, for example media buys. But there are lots of indirect costs: labor to create the campaign, sales effort to manage the account and win the deal are examples. And what if a buyer responds to 3 different marketing campaigns before purchasing? Which campaign gets the “profit” credit (this is a complex topic of its own called marketing attribution). And then frequently marketing spend has impact, but can’t be directly traced back to a particular campaign or tactic.

Now onto investments. This one is even more fraught with nuance. How do you allocate costs like brand value, website maintenance, a global dealer network.

And finally profit. Are any marketing campaigns profitable in their own right? Not directly. It takes a company to satisfy a customer need and for profits to appear on a P&L statement.

Am I going to throw my hands up and walk away from measuring marketing impact or ROI? No way!

It is important to measure the economic impact of marketing. Measurement and calculation of each experiment can be normalized and compared. And when compared, interesting trends that can improve future campaign performance (in other words, ROI improvement) appear.

Towards Usable Marketing Campaign ROI Metrics

Each marketing tactic is measurable in many ways:

  • Cycle time (from idea to execution)
  • Direct costs
  • Number of impressions
  • Number of conversions
  • Differential outcomes (A/B test results)

There’s more, but let me move on.

If you have a set of hard numbers for each campaign you run and then run 30 variants of campaigns all targeting your desired “conversion outcome”, you can get some interesting performance metrics around Direct Costs and Outcomes (conversions or purchases).

The job of each campaign manager on the team is to maximize the results from the campaigns they run and to improve the productivity of the spend under their direction.

ROI Improvement As A Marketing Productivity Metric

Let me drill into improving productivity. Say you are an email marketer. You have campaigns targeting C-level executives, Buyers and Developers. You should report on the performance of each segment and make assertions about marginal improvements for future campaigns targeting those segments.

Say you’re an event marketer and you attended 3 trade shows that quarter. You should be able to rank the performance of each audience/region/industry targeted, and use that information to make plans for future quarters and to inform the CMO-level investments in industry penetration and brand spend.

My belief is you should calculate the direct cost ROI of every campaign: ads, trade shows, emails, telemarketing. The goal of a marketing campaign manager is to both grow the number of conversions and do whats possible to get more in-target conversions at lower marginal cost. So that’s how you use ROI in marketing. Not to solve the problem of the ages, but to make the process more productive with each turn of the crank. That’s how you maximize marketing campaign ROI.

One Last Thing: Statistical Significance

One caveat to what I’ve stated above: statistically valid sample sizes. Typically campaigns focus on reasonably small segments and short timeframes. Be careful about making strategic changes with only a few data points. Be familiar with the way conversions are trending and devise experiments and execute improvements towards gaining more conversions. Share your data with managers and executive along with your recommendations about what to try next. Give your executives the information they need to plan for the future as you march toward statistically valid and data-driven decision-making.

“Take a Stand” Branding

I saw the juxtaposition of the words “brand” and “stand” the other day and my mind took a detour about how corporate action can speak louder than brand identities.

To me the word “brand” connotes the brand identity created and nurtured by corporate marketers. For example the distinctive logo and curved bottles associated with Coca Cola or the slogan “We try harder” associated with Avis Rent-A-Car. The branding concept is a cornerstone of marketing practice today thanks to the lifetime of work and writing of Al Ries. His long-term research on brands and profitability and short-term analysis of questionable brand marketing decisions are persuasive and valuable.

The word “stand,” as in “take a stand and defend it” seems to be a powerful evolution of the branding concept. In particular, I’m thinking about the purposeful actions and positive outcomes associated with taking a stand.  The positive sides of taking a stand is that you are authentic, principled and an agent of change. On the negative side, you are uncompromising, polarizing and “at risk.” Interestingly, the iconic Malcolm X said this about stands, “If you don’t stand for something you will fall for anything.”

In terms of business brands, Apple takes a stand on human experience innovation as evidenced by their rabidly loyal fans and large R&D budgets.  Federal Express takes a stand on honoring its on-time delivery service level agreement by investing in large delivery fleets and tracking technology. Both these companies tie their brand identities to their stands. In other words, they put their money where their mouth is. These are two simple and successful examples. Clearly there are others, including failures.

It seems that take a stand branding is frequently riskier than relying on the more static concept of brand. As with many things in life, the path one chooses for themselves and their businesses is highly correlated with one’s inner calculator with regard to risk and reward.

When I started writing this, I wasn’t sure I was on to something. Perhaps I’m just wallowing in  the semantics and simple rhyme. At this point I’ve persuaded myself to dig deeper and run a few experiments to test these hypotheses.

Optimism as a Personal Strategy

Over the years, pop psychologists, philosophers, business leaders and politicians have weighed in on the topic of optimism. Now it’s my turn.

My review of the optimism literature found no shortage of inspirational bon mots. Some of my favorites include:

“Better to light one small candle than to curse the darkness.” ~ Chinese Proverb

“The cynic is his own worst enemy. It requires far less skill to run a wrecking company than it does to be an architect.” ~ U.S. Andersen

“We must be the change we wish to see in the world.” ~ Mahatma Gandhi

“Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.” ~ General George S. Patton

“The task of the leader is to get his people from where they are to where they have not been.” ~ Henry Kissinger

These quotes are both amusing and inspirational. Without optimism, I’d have no choice but to accept my current assessment of reality as the only possible outcome. Not a pretty picture. The only positive from having a pessimistic outlook is that you will rarely be disappointed. “Death,” Woody Allen reminds us, “is one of the few things that is easy to do while lying down.”

For me, optimism is a way to shape reality. It is a belief that the future can–and will–be better than today. Let me be clear that I’m not being Pollyanna in talking about optimism as a strategy. Optimism alone is not sufficient for success. Optimism devolves into naiveté without a compelling vision, effective planning, a meaningful set of resources, and most importantly, action. The successful optimists that I know bolster their optimism with a strong foundation in reality and acceptance of the laws of physics and economics.

So how do I put optimism to work? I begin with an assessment of today’s reality that is grounded in evidence and fact. Today’s reality, however, isn’t destiny. Individual action can and will impact reality. Vision is the recipe for stirring together today’s reality and action to achieve your better future. And finally, optimism is the catalyst that induces action. It compels an investment of resources (and perhaps inspires others to join you) in the hope of achieving your vision.

Optimism is a very powerful tool for progress. As Scoop Nisker, a reporter at San Francisco radio station KFOG said in each of his broadcasts, “If you don’t like the news, go make some of your own.”

The Calculator Within, Part 2

Thanks to part 1, I have your attention. Good.

Let’s cut right to the chase, price leadership appeals strongly to our inner calculators. It is universal (rational in the words of the economist) when products are identical, to choose the lowest priced item. Walmart is the master of this strategy through tactics ranging from featuring prices prominently in their merchandising, running their price rollbacks ad campaign, and (in legend) fleecing employees and suppliers. Similarly, commodities like gasoline and groceries are inner calculator plays by subverting aspects of quality and service to the almighty price.

Inner Calculator

FedEx created an industry by appealing to the inner calculator. “If it has to be their overnight,” the saying goes. FedEx marketed their 10:30AM next day delivery service level agreement and backed it with a money-back guarantee. So we know the FedEx delivery time, but what is the price for their service? I don’t have a clue, but know it’s a lot more than $0.39 for a first class stamp. We each use our inner calculator to determine if the value of overnight delivery is substantial enough for FedEx.

The inner calculator drives software buyers to value quality and service more than price. (Innovation is also a key factor, but that is a different topic for a different day.) As a result, selling on price alone is rare in the software industry. Bill Gates’ and Larry Ellison’s personal wealth are the poster children of a software industry built on quality, service and innovation, not price. On the buy side, countless IT professionals, from programmers to CIOs, have build careers and nest eggs on their ability to translate the principles of quality, service and innovation into specific business solutions.

Even with the emergence of open source software, quality and service continues to trump acquisition cost. Open source makes technology free to acquire. Importantly, the projects and businesses that succeed in open source create a long term value advantage well beyond the initial acquisition cost savings.

Every time I look at an IT department budget, the number that sticks out is labor costs…employees. Smart CIOs know that is where the value is. They also know that the software they acquire is a rent payment on the brains of smart programmers working for software companies. IT professionals who listening to their inner calculators know that open source may be “rent free” at time of acquisition, but it is not “cost free” over the useful life of the technology.

While smart labor is in IT, the cost areas that make or break a business are in ongoing operations. Automating critical but repetitive functions such as processing orders, monitoring quality, and routing information are prime areas where IT applies smart labor to create long term value for business. After all, the most efficient bank teller cannot compete with the speed, accuracy or cost of operating a banking portal for displaying bank balances.

Focusing the Inner Calculator on Value

While price is always a factor for the inner calculator, its not the most important number. The most important number is the value assigned to the features, services and innovation of a product offering. A customer that precisely knows the value associated with a potential purchase or by automating a business process is the one that is ready to put the inner calculator to use…and to buy something. And Walmart, FedEx, Oracle, Microsoft, and Red Hat all have mastered selling to the inner calculator of IT executives to the delight of shareholders and customers alike.

The Calculator Within, Part 1

In my experience, there is no better way to foster a heated discussion than to quantify a claim. From guessing how many gumballs are in a pickle jar to forecasting future interest rates, humans have an inner calculator ready to quantify the size, scale and trajectory. Of course, anyone and everyone can shout out a number. Some, however, are more savvy (and more accurate) with their calculators than others.

Many marketers, myself included, present quantified claims. Fewer, however, explore the behavioral impact of such claims on customers. How you frame a discussion about quantitative information determines if you are “in the game” or irrelevant.

Quantifying claims achieves two important outcomes. First the quantified claim either establishes or fails to establish a bond of empathy between you and the customer around a specific area of interest. One clever example is a local real estate agent who sends a monthly mailer including the address, number of bedrooms and sale price of local houses. For homeowners in the neighborhood, this mailer sets their inner calculators abuzz with estimates of the change in value of their own homes. For renters or homeowners in different neighborhoods, the calculator is quiet.

Second, the quantified claim either establishes or fails to establish credibility. Returning to home real estate, think of all the mortgage refinance offers you receive in the mail offering below-market interest rates. The savvy inner calculator quickly rejects the low-ball rate. These mailers exist to prey on people who’s inner calculators are less refined or perhaps malfunctioning.

Empathy and credibility are important prerequisites for any conversation or business transaction. Prerequisites are nice, but I play to win. Moving from prerequisites to winning transactions is important work–and the focus of part two of this topic. You can read part 2 on December 8 right here at Bill Freedman’s Soon To Be A Major Trend.

Rereading Geoffery Moore’s Crossing the Chasm

Geoffery Moore's Crossing the Chasm

I remember reading Geoffery Moore’s Crossing the Chasm when it originally came out in 1991. At the time it seemed like a useful statement of obvious regarding market and product maturity with useful suggestions on how to move beyond selling to early adopters. His “revised” technology adoption life-cycle and “whole product” marketing became core parts of my practice of marketing. The book sat on my bookshelf, unopened for years…until last week.

I was asked by a client (recently funded and still in stealth mode) to help clarify the opportunities for integrating their new service with an established market leader. The assignment sparked a memory of Crossing the Chasm‘s pen-based computer example and a sample user, Jerome. I pulled the book off the shelf. Nostalgically, I scanned the book. I then read the discussion target-customer characterization. Wow. Fifteen years after its original release, the analytical framework and lessons remain useful and fresh.

In this case, the Crossing the Chasm model helped me deliver sound product marketing deliverables. Using the framework, I was able to quickly articulate some powerful use cases which were fairly easy to validate.

The client and I still have more work to do before launching the company and the product. Following the ideas in Geoffery Moore’s Crossing the Chasm enabled us to forge agreement on target customers, key investment areas and whole product issues.