“What is the ROI of my Marketing?” – every CMO
A great way to start answering this question is by looking at the data you already have. Things like TV ad buy records, lead data, social media, sales data, etc. If you’ve been tracking these sorts of metrics, particularly for at least 3 years, you’re in pretty good shape. However, does your internal marketing data tell the whole story behind the ROI? Not at all. Marketing doesn’t operate in a vacuum, so why should we assume it does when we’re measuring ROI?
External variables have a significant impact on marketing success. By way of example, let’s look at some of the external variables that have been statistically proven to impact the ROI of some of our clients. As you read through these examples, think about which external variables might have an impact on your business.
Client: A nationally recognized tire brand.
Gas prices, in which our client does not control, has an impact on how far their marketing dollars go. Just think about it logically…. If gas prices increase, people drive less, and therefore buy tires less.
Client: Outerwear clothing company.
For an outerwear clothing company, weather is crucial. When the weather is colder, their products are sold more. By looking at the weather patterns across their major regions, we helped them optimize their inventory by shifting product around in response to the weather forecasts.
Besides inventory optimization, we looked at how weather impacts the value of each dollar spent on advertising. The return on their advertising dollars is significantly higher at certain times of the year (in relation to weather temperature). The best gift they could ask for this year is a very cold winter.
Consumer sentiment & unemployment rate
Client: Branch of the U.S. Military
For the military, a recruit enlisting is the equivalent of a “sale”. We found that unemployment rate influenced the willingness to sign up for the military. As unemployment rate increases, people tend to enlist at a higher rate. Even more than unemployment rate, we found that consumer sentiment has an even greater impact. Translation – as consumers outlook on our economy declines, their willingness to enlist increases.
Home building starts
Client: Home building products manufacturer
Probably the most obvious of the examples shared so far, the number of home building starts in a year effects the sales of the home building products industry. Translation – if the market is flat, your marketing is falling on deaf ears.
If you’re actively tracking your marketing data, you’re on the right track. As you begin to calculate Marketing ROI, make sure you include relevant external variables into the model. Which external variables might be impacting your business?