About a century ago, department store owner and businessman John Wanamaker was credited with the line, “Half the money I spend on advertising is wasted; the trouble is, I don’t know which half.” This concept seemingly dominated advertising mentality for the next hundred years.
In the truly modern era, the idea that individual advertising efforts’ ROI is too complex to track is, like Wanamaker’s lament, a relic from a bygone era. Given our current economic climate and companies’ need to cut wasteful spending, it should be.
The truth is, ROI is a measurable effort and should be tracked to maintain efficiency in your system. But this is a more scientific process than merely studying the spikes in overall sales and drawing loose assumptions from the data.
A recent report from Marketing Sherpa shows over half of the nation’s CMOs had a 2012 goal of achieving or increasing measurable ROI (No. 1 on the priority list, across the board). Yet, counter-intuitively, these same CMOs failed to prioritize the very systems that could help them accomplish that goal—things like lead-tracking systems, multichannel lead attribution and database hygiene tools.
This lack of coordination has led to some equally dichotomous results. CMOs and marketers indicate they need higher-quality leads across the board, yet most also report little tolerance for in-creasing per-lead investments at the front of the funnel. The logic is simple. Low per-lead cost equals more leads, which equals higher sales volume, which equals higher ROI.
The failure in this logic is that it does not account for several other factors that help determine whether it is truly a more effective mechanism for increasing sales. Start by asking some questions of your marketing: What is the historical conversion rate on incoming leads? Which media are producing the highest converting leads? Are some media producing more leads and conversions in particular geographies and ZIP codes? Is there correlation between the time of day or week and the number of leads we receive? How many leads per week can your salespeople adequately handle and follow up with effectively?
ROI on some advertising, print in particular, can be harder to quantify-but that in no way diminishes its effectiveness.
It could be, and is often the case, that increasing the tolerance on a per-lead investment correlates to higher-quality leads (meaning those people most ready to buy), thereby increasing conversion rates, cutting the amount of representatives required to field these leads, reducing internal resources dedicated to servicing the back end and, ultimately, garnering higher ROI for your company. But this is also a blanket assumption that cannot be blindly followed either.
The secret is to track and analyze these efforts through various tactics. Any scientist will tell you that the only way to achieve accurate data is to constantly test new variables against a control. As marketers, it is our responsibility to take this same approach, always looking for new methods of increasing our clients’ ROI while basing our plans on media and creative tactics historically proven to work, from unique phone numbers and URLs placed on different creative pieces in traditional media channels, to segmenting online results through landing pages and short forms for information gathering and retargeting. Once this structure is in place, we recommend employing an interactive system to monitor and review your results so that modifications can be made quickly and waste can be eliminated before it spirals out of control.
Of course, this also requires an organization having and utilizing an updated Customer Relationship Management (CRM) system, such as Salesforce, to catalog and maintain records for all incoming leads. Better yet is having one that integrates with your lead-tracking system so it can know which leads are converting in your system and the length of the average sales cycle. If you know the average time between lead origination and closed sale, you can more accurately forecast budgets to your sales goals.
The best part is that none of these structures or systems is particularly difficult to implement. Once the initial groundwork is complete, the only real work on your end will be to make sure your sales staff is keeping the CRM up to date.
It’s important to remember that the ROI on some advertising, print in particular, can be harder to quantify—but that in no way diminishes its effectiveness. The key is defining the venue within each medium that most effectively reaches your target market.
While many companies may be happy with the idea that only half of their advertising is working for them, we hope your company is the one that wants to know, and is making plans to know, what the other half is up to.