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Stressed out by digital ROI? You’re not alone.

Wednesday, October 26, 2011
DAC
SEM

What is the return on investment of your digital marketing spend?

If you can’t answer that, you’re not alone. IBM recently conducted a survey of 1,700 Chief Marketing Officers in 64 countries – one of the largest and most comprehensive studies of its kind. The results of this survey (PDF), which were widely published and reported, show two things very clearly:

  1. Nearly two thirds of CMOs feel that Return on Investment will be the primary measure of their effectiveness by 2015.
  2. Half of CMOs feel “insufficiently prepared” to provide the hard numbers.

The inherent contradiction in these two statements is causing stress for marketers. There are a number of challenges in measuring digital ROI. But it doesn’t have to be that way.

Digital in the big leagues.

Until recently, digital was considered a “guerrilla” tactic. Marketers tentatively put small amounts of money into digital channels, cautiously testing the waters, while maintaining their tried-and-true offline budgets. At the time, the risk was low and the rewards were potentially great.

Digital marketing is no longer a fringe tactic. Depending on whose data you believe, digital has even surpassed television in terms of time spent and level of importance. Dollars spent in digital channels have not quite caught up in North America (though they surpassed TV a couple of years ago in the UK) but we’re getting there.

These budgets are no longer negligible. Digital dollars need to demonstrate solid returns.

Information overload?

Part of the problem may be information overload. We have access to an assortment of tools that can track every click, like, tweet, post, share, call, rollover or mouse movement that people make. Marketers are faced with a bombardment of raw data from all kinds of sources, and are collapsing under its weight. Raw data is useless unless it can be filtered, pared down, validated, and finally interpreted in a meaningful way.

Most marketers have limited statistics skills. They’re not good at sorting through data and turning it into information. So they’re hiring folks to do it for them. If you’re a data analysis geek, you’re probably sitting pretty in these recessionary times. As companies face the daunting task of sorting through enormous quantities of data, most in different formats and lacking context, the importance of the analytics professional has shot up. Most companies are scrambling to put data gurus in place who can build fancy spreadsheets and extract the two or three relevant insights. And those people have discovered that their skills are so in demand, that they can command high salaries and call their own shots.

Back to basics.

The answer lies in taking a step back. Most of those metrics are secondary. What is crucial is the objective. From where is value ultimately driven? Most marketing managers only care about a handful of Key Performance Indicators, and most CMOs only need to focus on one or two. Figuring out how people make the decision to purchase your product, where they come from, and what makes them pull the trigger is key to figuring out the conversion model.

Of course, it’s not quite that simple. “Digital” encompasses a wide range of tactics and channels. We still need to make a distinction between what ROI looks like in an awareness or branding context and what it means in the context of driving leads and response. We need to set different expectations for innovative channels and for mature ones. Loyalty, sharing and referrals all play a role.

By filtering out the irrelevant information and refocusing on the basics – sales, conversions, dollars spent – we can relieve some of the stress being caused by information overload. And that goes a long way towards providing meaningful indicators of return on investment…  and helping CMOs to sleep better at night.

Want to find out more? Contact us today!

Sari Stein, Digital Strategic Planner

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