Report about impact monitoring

For many years, organizations have been eager to find a way to prove marketing’s worth in real economic terms. Managers have struggled to relate marketing inputs to business outputs and have tried, for way too long, to work with not-so-credible attribution models, settling for less demanding performance metrics that are out of the scope of interest of the rest of the organization outside the marketing department.

Introduction

When consumers buy a product at a supermarket, a car at a dealer, a trip online, or an insurance policy at a broker, how do we know which marketing projects have impacted those acts of purchase? Which was the influence of those projects in each decision-making process? This is “the” recurring challenge marketing departments must face if they want to link their activities to the business. This is where most known attribution models fail to isolate the real effects of marketing on the bottom line of the business. Today, almost every attribution model used in digital media can isolate which acts of purchase have been impacted by the marketing campaign. But almost all of them fail to show the influence of such a campaign on the decision-making process of clients. In the offline world, it is even worse, as marketers struggle to find ways to trace acts of purchase to their several originating touchpoints.

Facts

• Companies that measure the ROI in their communication and marketing campaigns improve their profitability by 31% on average.
• Companies that use advanced data analytics solutions are 22% more profitable than those that do not.
• Companies that have a defined conversion funnel and understand the digital experience of their stakeholders are 15% more profitable.
• Organizations that use AI-powered interfaces are 37% more profitable than those that do not.

Source: Deep Digital Journey Study, LLYC, 2021

Where to start: With the objectives!

The first step for an effective ROI evaluation planning and execution is to set proper and measurable objectives. At the broadest level, they should be aligned with the overall marketing and business strategy, as well as with the mission and vision of the organization. It is necessary to gather information about all variables that influence and are influenced by the project under scrutiny and establish an initial diagnosis based on available information. This process will set the conditions for convergence between the project and the overall business. Objectives must have specific performance indicators, be limited in time, and have a clear compliance milestone quantitatively defined. Objectives must be established at the marketing chain of impact level and include positioning, education, interactions, costs, revenues, and return indicators.

Defining a robust attribution model

This stage represents the search for a criterion to define the cause-effect relationship between everything that happens in “the world of marketing and communications” and its impact on the profit and loss account. It should answer the following questions:

• how many acts of purchase have been impacted by the project being evaluated?

It requires isolating the number of acts of purchase that have been impacted by your project or campaign. Standard attribution models often use control groups, regression, and in some cases, trend line analysis. But, while these are the standard attribution models currently used by most corporations (in addition to less robust discretionary attribution models based on subjective criteria used mainly by digital media), they all base their findings on correlations at best. Caution should be then exercised as correlation does not mean causation. There are plenty of examples of marketing failure after decisions were made based on correlations that later proved not to be causation.

• What is the influence of the project on the decision-making process of customers?

This is the missing element from most, if not all, attribution models used nowadays. Digital channels, as much as all other experiential channels or touchpoints, fail to isolate which portion of the benefit generated by an act of purchase that was impacted by the project under evaluation, can be attributed to such a project. Digital media tried to do so by establishing arbitrary criteria (first click, time decay, etc.) that are far away from robust, let alone credible. To define the influence of projects on the decision-making process of clients the most robust and credible way is through ad-hoc quantitative research.

How to define monetization

The monetization criterion is the part of any evaluation model that should set the monetary base line upon which to apply the attribution model. Once you were able to isolate the number of acts of purchase impacted by the project and the influence of the project on each act of purchase, you shall multiply both of them by the defined monetary base value. This is the most robust and credible way to obtain, in real economic terms, the actual profit generated by each one of those acts of purchase.

In most cases, this monetary base value is represented by the gross or operations margin. In those cases where this information is not available, you could also use the marginal contribution of marketing. Another value of reference could be the actual value (in net profit) of a client in one year (not the customer lifetime value) The EBITDA could be used as a last resource as it includes all the efficiencies and inefficiencies of the business tainting whichever result you may obtain.

As part of the monetization criteria process, an evaluation model shall also be able to calculate not only the direct costs of any project, but also the fixed costs that behave as direct. In other words: the time spent by all people in the company involved in planning, executing and monitoring the project.

Collecting data

Measuring the ROI of marketing and communications projects is not a post-execution analysis. It is rather a diagnosis tool for planning purposes. Hence, the collection of data relevant to the evaluation must be planned, during project planning.

Execution

After planning the evaluation, a validation and optimization process should define clear and objective criteria to decide whether to invest or not in each project. Thanks to the planning process, marketers shall be able to validate whether the company will make money or not if objectives are achieved. They will also define the commercial viability of a project and plausible scenarios that should optimize economic outcomes.

Collecting data, analyzing it and calculating the actual ROI of marketing projects is not the end of the road. Through the data and results achieved and measured, marketers should be able to generate business intelligence that will improve future planning processes. This business intelligence could adopt the form of conversion ratios, historical data, a defined purchasing decision-making pie, etc.

Reporting

Reporting ROI and business results should include but not be limited to:

• A description of the methodological framework and evaluation planning.
• SWOT analysis integrating marketing and business perspective.
• A clear vision of the organization’s alignment to ROI Marketing and its degree of capability to conduct an ROI evaluation.
• Definition of relating factors 9or attribution model) and monetary conversion criteria
• Data processes (including collection plan) and display.
• ROI calculation for the project.
• Profitability analysis
• Business intelligence generation
• Conclusions and recommendations for future projects.