Commentary

Return Beyond Reach: Solving The Marketing ROI Riddle

A measurement partner of mine once said there are two types of people whom you need to convince when providing marketing analytics: The first is media-focused, brought up on gross rating points (GRPs) and impression counts. This group wants to get the greatest reach out of any marketing initiative. Yes, targeting matters to them, but amplification and an ability to be seen by more people is of the utmost priority. 

The second type are sales-oriented individuals, myopically focused on what is actually driving revenue. Sales-oriented employees are focused on the ROI. For every dollar in, they want to see at least that amount back (likely two or three times the spend).

At the end of the day, it’s all about value. What each employee type is looking for holds some value to an organization. But if we are really going to progress a brand, conversion is where we have to focus.

Reach alone does not drive business forward. Being more impactful to fewer people and driving a greater conversion rate may be significantly more valuable than something far-reaching, but low impact. Let’s paint a simple picture:

  • Scenario 1: A campaign reaches 10,000 people with 1% conversion at an average purchase price of $150. Total revenue to the company equals $15,000. 
  • Scenario 2: If the company spends the same amount on a secondary automotive campaign that reaches 1,000 people with a 15% conversion at an average purchase price of $150, that revenue jumps to $22,500, or 50% greater returns.

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The example illustrates the benefit in going deep with consumers. This is the reason that 62% of brands, according to a Bizzabo study, are increasing their live experience budgets to propel their message and business returns.

That doesn’t mean reach has no place in a metrics stack. Soft metrics, including reach, awareness, consideration, and sentiment, are all important to evaluate. A good analysis will find correlation or causation between these supplemental metrics and sales. 

Agencies are frequently asked to deliver on a particular brand objective. We ought to look beyond the initial objective and understand the implication of that objective on the brand’s financials. If analyzing correctly, we can project business growth based on performance of the soft metrics more easily associated with the brand objective.

We must also look beyond immediate impact, or we’ll lose sight of the potential long-term implications of our marketing efforts. 

Let’s go back to our example -- what if this campaign was for something that customers only buy once or twice in their lives, say a baby monitor? And now let’s say that Scenario 1 was targeted to first-time home buyers, while Scenario 2 was targeted to a Lamaze class. 

While those soon-to-be parents in the Lamaze class may have driven more immediate revenue, the first-time home buyers may offer greater long-term value. While only 1% of those first-time home buyers converted immediately, an additional 10% may have lasting intent and will buy the baby monitor when they become pregnant. The estimated revenue jumps from a $15,000 short-term return to a projected $150,000 long-term valuation. 

As marketers, if we don’t balance short-term and long-term expectations, we run the risk of failing to see the true ROI. 

As data continues to cement itself as the foundation of marketing decisions, it is essential to understand what value is really being driven back to the company. While certain metrics may help answer specific objectives, money talks the loudest. Marketers shouldn’t be afraid to go deeper, as opposed to wide. It may just allow companies to see a much greater return on investment.

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