August 22, 2014 | Written by: THINK Leaders
Categorized: Innovation | New Thinking
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Telling marketing to raise its return on investment is like telling a sick person to be well. If only it were that easy. In a recent study, establishing an ROI strategy was the top challenge companies mentioned about social media, while not realizing a return on investment was number six.1 The lesson: companies are more concerned about determining a way to measure ROI than in realizing the ROI itself. To state the obvious: you can’t choose the higher ROI activity if you don’t know how to measure it in the first place.
It’s not hard to understand why measuring ROI is such a concern. In a massively multi-channel, multi-media world, how do you choose where to invest time and money? There’s so much that can be so easily measured—Web conversion rates, engagement indices, influence scores. At the same time, each digital marketing project may produce an entirely separate set of metrics making apples-to-apples comparisons challenging or impossible. It’s easy to get distracted from what’s actually important to the business.
Knowing which metrics are truly important starts with at least a theoretical understanding of how digital activities relate to ultimate business goals Do more likes on your Facebook page translate to greater mindshare and a stronger brand? What about compared with banner ads? Do your tweets generate a higher rate of customer acquisition than your outbound e-mails? Over what time period are results expected? What metrics are consistent enough that they can be used to truthfully compare one initiative to another? This is a process that can’t be outsourced. In a digital world, deciding how best to measure ROI is a core business decision every bit as important as ultimately measuring it.
The Wharton School
“What we’re trying to do is come up with a clear understanding of terms, and a better way of capturing marketing’s contributions to financial outcomes.”
“I think the frontier right now is transforming the digital interaction to seem more human and emulate more of what we can deliver person to person.”