What Return On Investment (ROI) Really Means
Companies want marketing that works. But what does “work” mean?
Some marketing agencies will define a marketing campaign that “works” based on an increase in your following on social media, the number of customers, likes, or pageviews. But these numbers are meaningless without revenue — more specifically, revenue that surpasses what you put in. As a business owner, you are probably keeping track of your investment and what you’re gaining, so you can determine what is working, what isn’t, and how to invest more efficiently to make the most out of your marketing spend.
However, sometimes you may be focusing on the wrong factors. In the end, return on investment is what will tell you if your marketing is giving you what your business needs. Here is why return on investment is much more significant than vanity metrics.
Why ROI Is More Important Than Vanity Metrics
As previously mentioned, it’s important to measure results to identify areas of improvement. Marketers often use vanity metrics such as follows, likes, favorites, views, impressions, and more — in fact, according to Hubspot, only 35% of marketers think understanding ROI is important. However, these metrics do not measure success or how your business’s performance is impacted.
How to Identify a Vanity Metric
Vanity metrics can make you feel good about your marketing, but they’re ultimately empty data because you can’t use it to measure the impact on your revenue. Here are some ways you can tell if you’re looking at a vanity metric:
- It doesn’t help you make a business decision.
- These numbers are random.
- They’re seasonal/variable.
- You can’t tie it back to a customer’s action, i.e. a call, appointment, purchase
It’s dangerous to focus on vanity metrics that aren’t attached to a stream of revenue. A way to find out how your marketing efforts impact your business objectives is by measuring conversions.
This doesn’t mean that you shouldn’t pay attention to engagement, but they shouldn’t determine your success. Consider using your marketing budget for conversions, and your internal efforts for engagement.
A Focus On Conversions
Vanity metrics, or organic engagement, are easy to obtain, and reporting them can be of some use. However, it cannot be the only focus. Marketing spend and efforts impact profits and sales, and these should be the number one priority. One of the best ways to focus on ROI is to look at conversions.
When it comes to conversions, you can see how much you’re making from your marketing efforts. Understanding when and how a potential customer becomes a real buyer is more valuable than whether they like your page or not. You can improve or optimize that moment of conversion, allowing you to replicate the results and get more sales.
Traffic is necessary for conversions, but it doesn’t equal more conversions. The key goal is client conversions and retention, which impact the business’ bottom line and revenue. It’s better to focus on conversions and metrics that enhance conversions, such as customer lifetime value.
Create A Marketing Strategy That Will Give You ROI
At Hite Digital, we help you connect the dots between revenue and activity. We focus on getting you a return on investment and seeing actual revenue come in with our strategies.
Our integrative approach to marketing, which includes data analysis, ensures we create strategies that will benefit your business bottom line in the long-term, so your return on investment is always positive.
If you have a project in mind, let’s start talking about your goals and how we can partner with your business. For any additional questions about what we do and how we can help you obtain a positive ROI, get in touch with us now.
Owner Partner - Hite Digital Dallas
A creative and energetic marketer with a background in visual communications, Tatiana leads marketing strategy through a thoughtful consideration and love for visual aesthetics. She is the owner-partner at Hite Digital Dallas and Vice President at Hite Creative and holds a Bachelor of Arts and a Master of Science in Marketing from Texas A&M-Commerce.