The pressure on marketing leaders to show the return on investment (ROI) for their marketing efforts is more intense than ever. According to a 2022 PwC pulse survey, 45% of CMOs said proving ROI is a top-three priority, but their challenges go beyond traditional metrics. Meeting customer expectations, adapting to changing preferences, and navigating external factors like inflation and societal concerns were also top issues. In fact, 34% of CMOs said societal and environmental concerns were among their top three challenges. 31% cited shifting customer expectations as their second largest obstacle.
The role of the marketing leader is also transforming. The survey found that 48% of CMOs expect to be more involved in business strategy decisions over the next year. This shift in focus signals a need for marketing leaders to balance long-term brand-building efforts with short-term revenue goals.
A shift in ROI measurement
The approach to ROI is shifting. In 2023, 41.6% of the 1,200 marketing leaders responding to Marketing Week’s Language of Effectiveness survey said ROI was one of their most important metrics. In 2024, that number nosedived to 30.1%. In contrast, 34.2% said their company rarely or never measures the ROI of its marketing spend. Instead, they focus on customer acquisition and retention, delivering on business outcomes, and building brand awareness.
The traditional view of ROI clearly needs a rethink. While ROI was once the key to measuring marketing success, today's business goals require a more nuanced approach. At Junotype, we use a data-driven approach that gives leaders a better understanding of marketing's true impact. It goes beyond conventional financial metrics to focus on what matters: customer outcomes, community impact, brand growth, and long-term business success. Let's take a deeper dive and uncover the strategy behind the approach.
Understanding traditional ROI
Let's start with the fundamentals. ROI is an accounting term that measures the financial impact of an investment over a specific period. Simply put, it compares the money spent versus the money earned. For businesses, traditional ROI is a crucial metric for evaluating the profitability of investments in new products, equipment, or initiatives. It answers a critical question: Did this investment generate enough profit to justify the cost?
Marketing ROI
Marketing ROI (MROI) measures the financial return generated from a particular marketing campaign or initiative. It compares total revenue gains to the costs associated with that campaign. The goal is to determine whether the marketing investment was worthwhile and to what extent it contributed to the company's bottom line.
The formula for calculating MROI is:
MROI = ((Net Profit from Marketing - Total Marketing Cost )/ Total Marketing Cost) * 100
Net profit is the increased revenue from the marketing campaign minus all non-marketing costs. Total marketing cost includes all campaign expenses. This includes advertising, promotional materials, staff wages, and other related costs.
So, if your marketing campaign generated $15,000 in net profit and your marketing costs were $5,000, your MROI is 200%. For every dollar spent, you earned $2.
Target MROI ratios
Generally, an acceptable MROI is a 5:1 ratio, meaning for every $1 spent, you'd expect to earn $5 in return. A 2:1 ratio or less is unprofitable unless you factor all costs of goods and services into the equation.
Of course, this benchmark can vary depending on your cost structure, marketing channels, and target audience. One organization's successful campaign may differ from another's based on these variables.
While MROI gives a useful snapshot of a campaign's impact, it often fails to tell the whole story.
Understanding the limitations of MROI
Here are some limitations to using MROI as a singular success metric.
Complex attribution
One major flaw of using MROI is the challenge of complex attribution. A Q1 2024 survey from the CMO Council found that 40% of marketing executives said they need better attribution models to prove MROI. Here's why.
When you run integrated marketing campaigns, customers can engage with many touchpoints. These include social media, emails, digital ads, and search engines. They often do this before taking action. This makes it difficult to attribute outcomes to a specific campaign or channel accurately.
For instance, a last-click attribution model credits the final touchpoint for the conversion. Say your customer first learned about your product through a social media post. Then, they received a follow-up email and clicked on a digital ad before purchasing. Last-touch attribution would assign 100% of the revenue to the ad. Last-touch attribution overvalues some channels and undervalues others. This leads to a skewed understanding of what drives customer action, causing you to misallocate your marketing budget and resources based on incomplete data.
Changing customer journeys
The evolution of the customer journey can also cause challenges with MROI measurement. Campaign attribution models often assume customers follow a direct path from awareness to purchase. But that's rarely the case. Customers frequently switch online channels or go offline for personal recommendations. They may revisit online content multiple times or take unexpected delays before buying. Marketing attribution models can't capture this complexity, making MROI less reliable as a standalone metric.
Time-bound results
MROI is most accurately measured at the end of a campaign when you've collected all available data. True MROI requires a clear connection between the money spent and the financial returns generated. This is only possible once the campaign has run its course, which presents a fundamental limitation. During the initial stages of a campaign, it isn't easy to gauge success because you don't yet have complete data. Early measurements might miss the whole picture. Yet, because MROI is time-bound, data is limited to that specific period, which makes it challenging to attribute marketing efforts to longer-term business goals.
Missing other measurements of success
While MROI is valuable, it often overlooks critical qualitative aspects of a marketing strategy's success. Factors like community impact, brand awareness, and customer loyalty may also be important goals. But traditional MROI calculations don't measure them. Neglecting non-MROI measures risks overlooking your marketing's actual value. It also harms brand health and customer loyalty.
A broader perspective on MROI
To develop a more practical approach to measuring marketing results, adopt a broader perspective beyond traditional metrics. Strategic marketing focuses on tactics, channels, and campaigns that can be sustained and scaled over time. It favors long-term strategies over quick fixes.
Comprehensive marketing considers the complex needs of your business and your target audience's customer journey. When focusing on this broader perspective, you'll see that true MROI is more than immediate revenue gains. It could also include other measurable and important actions your audience takes, including:
- Organic website views
- Social media engagement
- Attendance at events
- Email open and click-through rates
- Newsletter subscriptions
- Unaided brand recall
- Customer satisfaction score
- Shifts in public opinion
- Impact on the community
These broader metrics give you a more complete and accurate view of your marketing and show the long-term impact on your business goals.
Real-life case study
A local hospital aimed to be a catalyst for community well-being by removing barriers to health. They launched a campaign that provided actionable information to boost survival rates for a time-sensitive and deadly health challenge. Specifically, the campaign encouraged the community to seek early treatment.
Of course, if successful in getting more patients into the hospital, the hospital would also realize a high MROI. But to better gauge success, marketing leaders measured the appointments booked due to each campaign. They also reviewed patient outcomes and the hospital's rating by trusted outside organizations. Improvements in all of these areas were factored into the campaign's performance.
MROI of community impact
Mission-driven organizations must consider the impact of marketing strategies on the community. This broader perspective recognizes that successful marketing isn't just about financial returns. It also involves fostering meaningful connections and improving community well-being. Here's why it's essential.
Building trust and loyalty
Investing in community initiatives, like the hospital's public health initiatives, can strengthen relationships with your target audience. People prefer brands that show a genuine commitment to social good.
Enhancing brand reputation
When community members see an organization contributing to social causes they care about, they feel seen and valued. This alignment can lead to increased brand advocacy. Customers will choose and recommend your brand to others, further expanding your reach.
Creating a supportive ecosystem
Supporting local initiatives creates jobs and stimulates the economy. A thriving community can enhance the overall market for products and services, benefiting everyone involved.
Measuring community impact as part of MROI highlights the need for social responsibility in marketing. When you focus on your brand's positive effect on the community, you can achieve financial success and lasting, meaningful connections with your target audience.
Community impact goals and metrics
Here are some real-life examples of marketing campaigns with community impact goals and metrics.
- Community education campaigns that provided up-to-date and reliable information about COVID-19 to the public during a time of uncertainty, fear, and misinformation.
- City-driven efforts and campaigns that promote healthy lifestyles or encourage community members to utilize public green spaces.
- Campaigns to engage the community by encouraging attendance at public meetings.
- Campaigns that promote voting on a particular election ballot measure.
All of these examples used various marketing tactics to meet their goals. However, MROI wasn't the most appropriate metric for measuring success. Instead, they focused on engagement metrics such as event attendance, use of community space or products, and voting data.
The big idea
Here’s the bottom line: your marketing metrics should align with your goals. Every campaign has unique objectives, audiences, and outcomes. Tailor your metrics to define success based on the specific goals of each campaign. Different goals require different measurements to gauge the full impact.
Today's definition of marketing success extends far beyond traditional ROI. Financial metrics offer valuable insights. However, they miss the full impact of marketing on customer relationships, community engagement, and brand reputation. It's time to adopt a broader perspective that values long-term outcomes as much as immediate returns.
A data-driven and comprehensive approach to measuring success will align your marketing strategies with your core values and mission. You'll focus on metrics that reflect genuine community impact, customer loyalty, and brand awareness while also addressing the unique goals of each campaign.
At Junotype, true marketing success goes beyond simply achieving immediate metrics. We succeed when our campaigns create lasting value for our clients and the communities they serve.
