How to Measure what Matters and Boost ROI

These days you can measure just about any sort of marketing metric. But that doesn’t mean you should. Measurement means manpower, money, and meticulous monitoring.
When it comes to marketing or recruiting, you need to carefully select what metrics you want to track (and by what means). You need to determine how you measure what matters most to you. That’s the essence of gauging ROI.
Laser focus on ROI is a topic that should be at the front of every marketer’s mind. Exhibit A: one survey of more than 1,200 CEOs found that 74% wanted their marketers to be ‘100% ROI focused.’
So where’s the best place to start measuring what matters? First, follow the money.
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1. Find the Revenue

 
You must clearly define the things you do that drive revenue. Otherwise, you’re shooting in the dark without much to justify your paycheck. Considering the fact that 80% of CEOs don’t really trust the work of marketers to begin with, that’s not an ideal position to be in.
You need to tie your efforts to revenue and ROI if you want to be efficient with money and time, and a responsible steward of resources. It’s the only way to prove that what you’re doing is working and whether or not your team is improving.
Tracking the financial outcomes your team is responsible for gives you accountability, insight, strategic direction, and ultimately, leverage. How else do you plan on persuading your boss into upping (or keeping) your budget? Revenue proves how indispensable you are and dictates which strategies you should be spending more time on.
So yes, everything you do should have numbers tied to it. Cost, hours, revenue, leads produced, etc.
How much did it cost to produce it, and how much time? How much revenue did it play a role in generating?
Don’t make the mistake of lumping all your initiatives into the non-specific lead generation bucket. Branding, sales support, and PR efforts should all be defined, scrutinized, and prioritized according to ROI. That’s the only way to account for all you’re doing.
Take a few minutes to write down all the ways in which your team is responsible for driving revenue.
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2. Measure and Assign Value

 
Did you write them all down? Great, now consider:
How much of these revenue driving activities are you doing?
How many leads are you producing?
How much sales collateral are you creating?
How many events are you attending?
Once you define each marketing activity, you must clarify the revenue attached to it. Don’t forget to add in the revenue that comes from retention. If you need an extra nudge to love the ones you’re with, remember that retaining customers is key to profitable growth.
Helpful hint: Lead generation is more of an exact science when it comes to revenue attribution. However, with activities that aren’t directly tied to revenue, such as sales support, thought leadership content, or branding, you may have to assign an arbitrary value based on a percentage of the revenue generated. E.g. This presentation, proposal, or white paper was responsible for 20% of the sale.
Your table for measuring and assigning value for marketing efforts might look something like this:
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3. Create a Baseline Number for Each Initiative

 
It’s crucial to establish a baseline for your marketing efforts. How much revenue did you make last year? What’s my value per effort? How many leads did you generate?
Without a baseline number for each marketing initiative you produce, how can you track progress and ROI? There’s no way to tell if you’re getting better or worse unless you have figures to compare and contrast. You need to calculate benchmark numbers you can measure against so you can precisely track your ROI for each activity.
Take the amount of revenue you’ve generated and divide it by the amount of effort it took to produce that revenue. Or, as the article linked above suggests, use the following formula: Baseline = Total sales – sales attributed to marketing
Now you have your value-per-effort, or the dollar amount you can tie to each initiative.
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4. Define the Costs of Your Efforts and Determine ROI

 
You’re on your way to determining whether or not your marketing is pushing profitability, and being able to clarify your marketing cost ratio. Most businesses consider a 5:1 marketing ratio as solid (bringing in $5 for every $1 spent), though this target will fluctuate according to what industry you’re in and what kind of budget you’re working with.
How much did your marketing efforts cost? How much did it cost to attend the trade show or run that Adwords campaign?
Once you add it all up (feel free to use a marketing calculator), see how what you’ve spent compares to the revenue you made. Again, don’t forget to factor in the revenue wrought from retention.
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Once you’ve clarified your ROI picture, you need to figure out how to produce more revenue at the same rate, how to increase your margins, or perhaps a little of both. To look at potential areas of improvement, always go to “the next metric back,” or the metric that is the closest to the measurement you are currently trying to improve.
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Measure Secondary Metrics to Inform and Improve

 
While you shouldn’t lose sleep over those secondary or ancillary metrics that aren’t tied to revenue — like clicks, bounce rate, cost-per-click, or impressions — they often contain hints that can help you improve your efforts. Take email open rate for instance. If your open rate is high, that’s a good indication that you nailed the subject line, and you did a good job of enticing people to open your email. Which is a big deal, as 33% of email recipients open emails based on the subject line. Getting an email opened is a first, crucial step toward getting more people to read your content, and taking the action you want.
However, if you have a high open rate but a lousy conversion rate, that means you need to address your content and perhaps streamline your point of conversion.
So open rate is not an end to itself, but if you can find ways to increase your open rates, that increases your odds of getting more click-throughs, and thus, more conversions. Or the more people who open your email, the more opportunity to yield a better ROI.
Secondary metrics are those things that help you define why you’re successful, but they don’t necessarily define success. So don’t adjust tactics with the end of improving secondary, or non-revenue-related measurements. Just use them to inform, adapt, and optimize your brass tacks revenue-based strategies as needed.
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A Hypothetical Case Study

 
This process works on every scale. Let’s look at it within the context of a sample lead generation campaign.
Let’s say we just ran an email marketing campaign, and wanted to define ROI and talk about what metrics we should use to improve the campaign.
CAMPAIGN OVERVIEW: Here are some hypothetical stats regarding metrics you’d likely want to know about on any email campaign. Feel free to insert your own.
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EMAIL PERFORMANCE:
While this campaign showed a positive ROI, there is definitely room for improvement. Let’s dig deeper on the secondary metrics to see where we can improve our ROI.
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LANDING PAGE PERFORMANCE:
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The Results

 
It looks like our email and landing page performed very well. Hi five!
This means we likely had a good subject line and the point of conversion created sufficient interest. If we look at the cost-per-lead, it may be tempting to get excited. However, the value-per-lead and close rate are a little low.
So where did we go wrong here? In this case, I would examine the list, and revisit how (or if) it was segmented. If you had a good open rate, and plenty of people are getting to the point of sale and not buying, then that tells you something. Namely that you probably are talking to the wrong people.
With the response were were able to achieve, we assume the list was somewhat targeted. But maybe not targeted enough.
Perhaps the thing you were selling was too pricey. Or too niche. Too many marketers just send everything to everyone, as opposed to segmenting email lists according to who might be most interested in your particular products/services.
Monitoring meaningful metrics will allow you to create a more targeted list so you are only reaching people who are able (and hopefully eager) to buy. It’s a matter of weeding out what’s not working, learning from flops, feats, and feedback, and pivoting accordingly.
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The Takeaway

 
The steps listed above are intended to give you a tangible strategy for how you should be allocating dollars and aligning strategies that generate the best ROI. However you make that happen, just remember that revenue is the king!
If you are getting the value-per-effort you need, don’t worry about a high cost-per-click or a low open rate. These are merely metrics to help you find more revenue and get more bang for your marketing buck. Revenue, and activities that directly generate it, must guide our decisions. Or as this recent Forbes article on driving revenue growth put it, “…the new world requires linking marketing strategies to revenue and profit outcomes – therefore relying more on behavioral data than just perceptual data.”
That’s how you start measuring what truly matters.