How do marketers measure ROI?
A record will be broken in 2024, according to recent research by WARC. For the first time ever, global ad spend will exceed $1trn (£791bn).
And that’s not the only positive signal coming from the marketing world. A report by Nielsen earlier in the year found that despite ongoing macroeconomic concerns, 64% of marketers worldwide expected their marketing budget to increase in 2023.
It is precisely for this reason that marketing directors must be able to demonstrate the effectiveness of their spending. There is much discussion in the industry about the dangers of short-termism – an emphasis on short-term results at the expense of long-term value creation. But the truth is that marketers must be able to balance the two. And to do this, they must understand what to expect from their investments in the shorter term.
So, how effective are marketing teams at measuring return on investment? And which channels and strategies have proved most valuable?
Before exploring the ROI of particular marketing strategies, we should first ask how marketers measure success. Unsurprisingly, the most widely used measure of the effectiveness of a marketing strategy is the impact on sales – the ultimate measure of short-term performance.
But three of the next five most-used metrics – web traffic, social engagement and social media subscribers – are all specific to digital marketing and digital engagement.
This could be an indication of the direction of travel for marketing generally; digital channels have become the priority, and many marketers measure success based on how their brands perform online and on social media.
The way marketers measure success broadly aligns with the level of confidence they have in measuring returns across particular channels. For example, it makes sense that so much emphasis would be placed on web traffic, social engagement and subscribers, as social media (61%) and web search (59%) are the two channels for which marketers feel most confident when it comes to measuring ROI.
Despite the proliferation of other social platforms, Facebook still produces the highest returns of any social network and as such, it remains a priority for 64% of marketing professionals.
Youtube, Instagram and TikTok were each cited as the highest returners by 16% of marketers, and although only 7% of respondents said LinkedIn brought the highest returns, it remains a priority for a third of marketing teams.
So, which specific strategies are marketers prioritising for measurable ROI? Well, short-form video content is the focus for a third of marketing teams, while direct messaging on social media and SEO are each being prioritised by just under a third of marketing professionals.
But the the data also shows that despite the need to demonstrate strong returns, marketers are certainly aware of the need to balance short-term returns and long-term value. Thirty percent of marketing professionals are prioritising content creation that aligns with their brand’s values, despite very few (only 4%) ranking it as the driver of the highest returns.
So, with marketers feeling confident about their ability to measure ROI across various channels, they are naturally prioritising those channels and strategies above others.
But as firms continue to move toward multichannel (and indeed omnichannel) marketing, marketers are facing a new challenge when it comes to measuring and demonstrating returns.
For instance, it appears that less than half (48%) of marketing professionals worldwide are confident in their ability to measure the ROI of cross-media marketing, with most focusing solely on reach and frequency, rather than returns. The gap is largest in North America, where only 42% of marketers focus on reach, frequency and ROI.