When it comes to measuring the return on your marketing investment, there are as many answers as there are variables. Obviously, metrics are not a one-size-fits-all proposition.

• Timelines Making a timeline of marketing actions can be very helpful because it allows you to see what you did, when you did it, and track response, such as sales, inquiries to the call center, etc. By comparing marketing inputs and outputs you can get a sense of what drives sales.  If you can identify a correlation, the math is pretty straightforward and you can get a good idea of what drives your ROI.
• Grids Many marketers prefer to use grids because of the limitations of timelines. They are very easy to make in excel and you can overlay activities of different durations, plus they allow you to insert additional information. However, grids also have their drawbacks.  For example, intensity can be difficult to measure, plus grids can also get cluttered, confusing, and unwieldy.
• Tracking and Two-Variable Modeling Another approach is to track all activity using a variety of metrics.  With tracking, you lose the visual simplicity of grids, but you can include as much data as you want. You don’t have to guess beforehand what you think will be most relevant.  After tracking for six months or so, you should have enough data to build two-variable econometric models. However, if there is too much market activity, it will be hard to find a two-variable model that explains more than 50% of the variation in the data.  A model that offers more doubt than certainty is of questionable value.
• Multivariate Modeling Some of the world’s premier marketers use multivariate modeling.  While prohibitively expensive for most companies, you can include a variety of marketing and economic factors and get much better models than you can using only two-variables. However, multivariate models are extremely complex, plus designing them is extremely difficult. A successful multivariate effort requires a delicate balance of high level quantitative skills and street level business acumen.

Tags: ROI

This entry was posted on Tuesday, December 8th, 2009 at 5:45 pm and is filed under Business Practices. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.