How to Measure ROI
If you are in the marketing field, you know about the Return of Investment (ROI). It is a key performance indicator used to determine the efficiency of an investment or compare the profitability of several different investments. Generally, ROI is used to measure the amount of return on a particular investment’s cost, which is why it is one of the essential calculations in the business world.
Professionals in the commerce market should know how to calculate ROI. They must also understand the meaning of ROI and why it is essential for their business. Still, many people do not know how to determine the return on the money they spent. Here in this article, we will suggest some methods to measure ROI.
Different Ways to Measure ROI
Single Attribution (First or Last Touch)
This method is the least expensive and the most common way to track your Return on Investments (ROI), through the value of the first or last touch of your marketing program. The first touch refers to the amount of the FIRST program that touched the deal. Generally, the first touch program is the lead source. On the other hand, last touch attribution helps determine the revenue from the LAST program that touched the lead. This method provides useful insight into your returns into the early stages of the revenue cycle. Furthermore, this method also gives straightforward results related to “investment per” lead metrics.
Single Attribution with Revenue Cycle Projections
The main disadvantage of using the single attribution method of determining ROI is that the businesses do not take time into account. As a result, the companies’ future decisions mostly based on short-term ROI rather than long-term gain. This method mainly focuses on your marketing program’s revenue and uses lead quality to evaluate those programs. However, it gives future results based on past performance, so you cannot incorporate underlying changes.
Multiple Touch Attribution
This method is a complex one, which sometimes becomes time-consuming and expensive. This method is useful for long revenue cycles, and that’s why it requires a comparison of various customers’ journeys to see the impact of each touch. Apart from that, this method also involves online surveys, which are generally easy to create and require evaluation once the data collected. Still, through online reviews, you are able to judge the response of those who answered the survey.
Test and Control Groups
In this method, you have to take two groups that use the same marketing tactics, then compare results based on a common factor, such as expenses on advertisements. This method will help you determine the effectiveness of each advertisement. Usually, this method gives a correct picture of ROI.
Full Marketing Mix
Among all, this is the most accurate way to determine ROI and gives the most accurate results. This is a heavily data-based method that requires data gathering and analysis. It also considers the impacts of other factors that might affect your ROI, including the pricing, product quality, economy, and competitor moves. Generally, this method is known to be right for large companies with a large budget.
