Marketing ROI (Return on Investment): definition and measurement

What you’ll learn:

• What is ROI in Marketing?
• Why is Marketing ROI Important?
• How to Measure Marketing ROI
• Marketing Channel ROI
• Email Marketing ROI
• Social Media ROI
• Digital Advertising ROI
• Event Marketing ROI
• Start Measuring Your Marketing ROI

Marketing ROI, or MROI for short, is the return on investment your company receives from all of your marketing activities. It refers to all profit and revenue growth from all of your different marketing channels. These channels may include email marketing, social media marketing, digital marketing, and any other type of marketing.

According to the sixth State of Marketing report from Salesforce, improving marketing ROI and attribution consistently ranks as a top priority for marketers worldwide.

In a marketing landscape where businesses encounter soaring customer expectations for personalized marketing experiences across every channel, it’s more important than ever to be able to accurately measure marketing ROI. From channel-specific MROI to overall MROI, the more clearly you can measure it, the more clearly you can prove that your marketing software and strategies are working.

Marketing ROI illustrates how your marketing is performing and how it is impacting your business. This clear information can deliver huge competitive advantages. When MROI data shows you which marketing channels are most effective and most profitable, you can pivot your marketing spend to focus on those channels and reach more customers.

The ability to quickly and clearly determine the most effective marketing tactics and channels is particularly important for small and midsize businesses (SMBs), where budgets are more constrained and value needs to be proven as fast as possible.

Using data to measure MROI gives you a clear marker for analyzing campaign success, which allows your marketing team to defend your marketing spend to your leadership and justify further investments in marketing technology. This can be helpful for marketing teams at companies of all sizes, but especially at SMBs, where new technology investments can be a luxury.

Some businesses struggle with measuring marketing ROI. This is usually due to disorganized marketing data, unclear links between customer activity and business outcomes, or tracking the wrong metrics. To get over these hurdles, you first need a strategy for MROI measurement.

The vital components of any marketing measurement strategy are:

• Set clear goals.
• Identify costs.
• Get the right technology.
• Create a formula for calculating MROI.

The basic formula is MROI = (Marketing Value − Marketing Cost) / Marketing Cost.

This core formula applies the same way to every campaign on every possible channel. However, there are many more detailed and nuanced ways to calculate MROI. Be sure to pick the way that works best for your business, and consider using an ROI calculator to get started.

As you develop your strategy, keep in mind that MROI doesn’t always have to be financial in nature. Once you’ve set up ways to track the financial value of your marketing activities, be sure to add softer metrics, such as social media likes and followers, to the equation.

Ultimately, calculating MROI is about determining the best way to consistently deliver the best engagement to your customers. These hard numbers will give you clear insights into the messaging and channels that connect best with your customers — giving you the data you need to personalize their journeys and cultivate long-term customer relationships.

Measuring marketing ROI means calculating marketing performance on each and every channel. Here’s a primer on how to measure MROI on key digital marketing channels.

Email has a well-deserved reputation as a high-ROI marketing channel. In fact, email has an average ROI of 3,800%, which makes it just about the best marketing investment your company can make. This makes it an essential channel for almost any business, and an especially important channel for SMBs.

Email marketing ROI is also fairly easy to measure. By tracking open rates and link clicks, and following your readers’ journeys across your website, you’ll quickly get a clear picture of what works best for your email marketing strategy.

Here’s an example of calculating email MROI:

A local grocery store sends a weekly email to its customers. One of its partners, a local cupcake shop, pays the store to place an ad in its email.

Through the tracking URL in the email ad, the cupcake shop can see how many visitors visited its website, and how many ordered cupcakes.

If the profit the cupcake shop received from these visitors was more than the shop spent on the email ad, it may want to keep advertising with the grocery store — or even reach out to other grocery stores to run similar ads.

Social media can be a very high-ROI channel for many businesses — but remember, it’s not all about hard numbers. While social media can help you generate leads, gain followers, and garner website traffic, it’s also about brand awareness and cultural impact.

Tracking key social media metrics such as likes, followers, and page views is essential because it helps you understand whether your messaging is hitting the mark or not, allowing you to quickly pivot your strategy. This is crucial for SMBs, as it shows whether it’s better to keep things organic or invest in paid social media.

Here’s an example of calculating paid social media MROI:

A fashion magazine is trying to attract more subscribers, so it starts offering a free trial. All of its social media posts promoting the trial include a tracking URL.

The magazine pays to boost its posts on social media for a week. In that time, it receives many new visitors, a percentage of whom sign up for the free trial. After the trial, a smaller percentage become paid subscribers.

The final number of paid subscribers would show the fashion magazine whether it was worth paying to promote its posts on social media. By going back and tracking where those subscribers came from, it would also show which social media channels led to the most valuable new leads.

There are many different types of digital advertising, and measuring the MROI of all of them can give you a clear picture of the value of your marketing spend, and help you focus on the right channels. Email and social media are two of the most important digital advertising channels, but display, native, search, and video are an essential part of almost any marketing strategy as well.

Here’s an example of calculating digital video advertising MROI:

A local theme park makes a short video promoting its new electronic ticketing system, which is tied to a mobile app. The video is shared on a variety of digital advertising channels — including social media, display, and natively on the park’s website — and it includes a tracking link that leads to a vacation-booking page.

After the video ad stops running, the park can calculate digital advertising MROI by weighing the number of new vacations booked against the cost of producing the video and sharing it across its chosen digital channels.

Live events are an important part of B2B lead generation, but they’re often a big marketing expense. As such, it’s essential to clearly measure your MROI. When it comes to events, everything from advertising the event to paying presenters and vendors is part of your marketing spend, but the connections you can make with new customers are often well worth the cost.

Here’s an example of calculating MROI for an event:

A small architecture firm holds an event to publicize its designs for office buildings and spends a fixed sum on inviting local business leaders and promoting the event through email, social media, and web campaigns. Other marketing expenses include renting the venue and paying food vendors.

At the event, attendees are encouraged to sign up for the firm’s email list, follow the firm on social media, and most importantly, start working with the firm to design a new office building. After the event, the firm measures the number of email leads generated, new social media followers gained, and new contracts initiated. If the value of these is greater than the value of the collected marketing expenses, the firm has generated positive MROI from their event.

Accurately measuring marketing ROI is key to improving your marketing strategies, no matter your industry or whether you’re an SMB or enterprise business. When you use marketing technology to power your MROI analysis, you’ll have the data you need to create messaging that connects with customers on all their preferred channels.

That’s why clear marketing ROI is the key to short-term wins and long-term customer relationships alike. To cut through the clutter and start measuring your MROI clearly, try out our ROI calculator.