24 Sep 2013
September 24, 2013

How to track ROI

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ROI (return on investment) tracking is one of the foundations of a company that has any desire to be around for its’ third birthday and beyond. Unfortunately, in this world of set it and forget mentality far to many of the small to mid sized businesses out there overlook this most important part of the marketing cycle.

In fact, this is probably the most overlooked part of most of the companies that we deal with. The reason? Well let’s discuss that first.

Most people are hesitant to spend money on marketing. For many, it is like pulling an angry honey badger out of a hole by the tongue. Every dollar is fought for and painfully, often with much bloodshed, allocated to a particular campaign. Owners or managers will look at the demographics of the ad campaign, who it talks to, how they will see it. Often there is much debate and conversation around messaging and creative, timeline, duration, total budget and so on. But then something almost unexplainable happens. That same honey badger then goes away and almost without fail forgets that the ad is running all together. That expense becomes a line item on a P&L somewhere often never to be seen again.

Now, first… The idea that a responsible owner or manager takes the time to bulldog the spending of money is good. Someone needs to. But what happens next, that is the ROI question.

For those who are responsible for the management of advertising and marketing budgets the most (and I do mean most) critical part of the job is ROI tracking. In the last 10 years, this has become progressively easier. Digital media has created a world where impressions, click throughs, and conversion become instant statistics that can be quickly overlaid with cost and bobs your uncle, ROI. But this has caused many people to stop doing the things that we all had to do before the instant analytics were available and those things are a dying art in desperate need of resuscitation in most businesses.

Ok, for those of you that sell digital products on amazon… Stop reading. The analytics you get from your PPC campaign and your google analytics accounts are all you need. But, if you sell anything else, have a storefront, ever talk to a client or take orders for products or services outside of your website. READ ON!

ROI tracking consists of 2 very important parts. First, the real trackable return. That is the number of people that bought from you directly from that effort. Second, brand equity.

We will discuss first the trackable return. This is a great one to deal with first as it is the most tangible. It is what results in sales and what ultimately drives your ability to stay in business. Here are the top ways that we suggest tracking ROI.

1: The most forgotten art of ROI tracking is the ask… When you are selling a product or service… Ask them how they found you? We are always shocked at how many people DONT do this. We hear all kinds of excuses, like “we don’t want to annoy our customers”, “we don’t want to take any more of their time” , even “we don’t have an easy way to record it”, mostly by the people who are dealing with customers. Most of the time, it is interesting to note, they are not the people footing the bill for the advertising. The key to this is simple. First, do it. Second, record it. Although the do it seems to be the most difficult part of this deal often the record it gets in the way. We have seen people do things as easy as a tally sheet by a cash register all the way to an iPhone app that their employees used to record the data. Whether you use a CRM (customer relationship management system) or not, the key is to get the data so you can use it to make more informed decisions.

2: If you have a phone number DONT USE IT. Ok, so that sounds weird I know. But here is the deal. When you answer the phone and ask a client how they heard about you sometimes you get answers like “I found you online”. Well in today’s world of multichannel online advertising, this can do little to actually track ROI. Was it the online phone book ad, the facebook ad, the PPC ad, the SEO? This kind of data barely narrows it down to a category and much more prodding of the client, like “Ok, thanks, but where online” can push them to annoyed quickly. The trick is to use tactics that actually give you additional data without having to get it from the client. This allows you to turn your “online” answer into something useful. We use a product called Kall8. This allows us to have multiple phone numbers and put a different one on every ad we do. This means that if we have 100 ads running that 100 of them have different phone numbers. Yes, I said 100. All of them ring to our main number, which we never put anywhere and at the end of each month we can look at the numbers of people who said they found us online and we can add in the amount of calls we got to each number, the duration of each call (tells us if the call was of any value or not. 10 second calls are usually just solicitors or they were looking for something else), and where it came from. This is a powerful tool in the ROI toolbox.

3: Google Analytics: It is always surprising to us how many people really have no idea what lives in their google analytics accounts. Many people are incredibly surprised to learn that inside the magical google box, you can find who is sending you traffic (called referrals), how many people are typing in your domain directly, how many people are visiting your site coming from searches online, which searches and how many.

4: unique URL’s. Much like phone numbers, unique URLs can be a good tool to track ROI. Used in conjunction with your google analytics account you can see quickly how many people ended up on your site from any URL including ones that you own and have forwarded to a specific page on your site.

Now, many people ask ok, so I have this data, what now. Well lets play out a real scenario. Imagine you are paying the phone book $1000 a month for your phone book ads. Lets say that you sell cupcakes. Now lets say that you now know that of the 2500 cupcake customers you had this month that only 60 of them found you in the phone book because you asked them, and you only had 9 calls from the number that you put in the phone book. And you can only attribute $250 worth of revenue from the phonebook ad this month to actual results. It is a simple conversation that this is not providing the ROI that you need to justify renewing a contract.

Most companies, like the phone book, have lost of fancy things to flash in front of your face. We call them cons. Our industry hates that term. But they are data that they show you about what they have done to try to justify the continuation or contract renewal. They are big numbers like number of impressions, or clicks or the number of people that visited a site or something like that. And, for most people these numbers are enough to just sign up and move on. But for those who track ROI, none of it matters, because it is not generating real, tangible, results.

Now, the second part of ROI, which is a more slippery conversation is brand equity. For those of us who have ever been incharge of large advertising budgets, this will always get a smile. It was the two words that we heard pitched across the desk over and over and over by ad execs for magazines, billboards and other expensive media. Brand Equity is about top of mind marketing, it is about putting your brand in front of people that may eventually make a purchasing decision and your company wanting to be that purchasing decision when it is made.

Now, if you are selling cupcakes and someone is pitching a $10,000 page in a magazine, it is a fairly easy decision to not do it (I hope). But if you are selling $3million dollar yachts or $100million dollar jets, that may be a compliantly different conversation. Brand equity is a real part of marketing. We, as a culture, buy when we feel we have heard enough about a product or service that we can make a decision. Studies show that is around 3 positive touches. This means that if you are tracking ROI on that buyer that you will find their last touch, but you won’t find the first two. So, there is some money to be spent on those first two that ultimately led to the third and the purchase. This is a category that you have to be very careful with however because it is easy to fall into the trap of throwing money out in this category with no expectations.

If you are tracking ROI and you are spending this kind of money, the way to see if it is working is to watch total sales trends. Are sales up this month over last month or over this same time period last year? By how much? Most of the time, this is not an accident, and you can attribute some percentage of that to the brand equity money that you are spending.

Tracking ROI is more than making sure that there is more money coming in then going out. It is a refinement tool that allows you to reallocate dollars that are not working hard enough for you and put them into activities that are generating real results. Imagine being able to put 80% of your budget into the 20% of the activities that are really creating new buyers. Now that is just good business.

By, Christian Riddell

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