Marketing Campaigns: The Measure of Success

For Marketeers, the Return On Investment (ROI) calculation has long been the standard measure of success; although we look at response and conversion rates, ultimately we want to know if the campaign has made a positive financial impact. On occasions we step outside the boundaries of ROI, but that is usually in relation to a brand awareness campaign or similar.

In a previous blog we looked at how understanding Lifetime Customer Value can help you improve your ROI. When calculating ROI, many people take a short-term view and ignore the Lifetime Value they will obtain from those customers.

The “real” calculation for ROI

If you were to Google the calculation for ROI, you would be offered many results showing the same method of calculation:

ROI =
Gain from Investment - Cost of Investment
__________________________________
Cost of Investment

Using a real-life example from a client of ours, this would work out as follows:

ROI =
(£12,810.69 - £5,487.00)
____________________
£5,487.00

Which provides an ROI of 3.70 – a great result by any standard. However, the “real” ROI will be much higher than this when lifetime value is taken into account.

For this same client we have also calculated the average lifetime value per customer to be £1,186.17. The campaign in question generated 112 customers, and if we treat those as average customers, this would make the ROI much higher, using the calculation as below:

ROI =
(112 x £1,186.17) - £5,487.00)
_______________________
£5,487.00

Thus, by taking the lifetime value into consideration, the ROI has been transformed from 3.70 to 23.21 – over 6 times greater. This demonstrates how ROI is transformed when Customer Lifetime Value is factored in.

Looking beyond the financial gain

The impact of marketing campaigns can and should be measured beyond the immediate financial impact that they generate. Whether the campaign is designed to generate brand awareness, leads, or direct sales, there will also be non-financial gains.

All campaigns will generate brand awareness and influence. A campaign might start the thought process around your products and services, which could generate revenue in the future.

Nurturing prospects

When running campaigns, a natural consequence is to generate prospects that are not yet ready to purchase. How you nurture these potential customers can dramatically impact the longer-term success of the original campaign.

The nurturing process can be implemented by a variety of marketing automation tools (such as PeopleStage by Apteco) or through traditional sales channels within your business.

The number of customers that you acquire should ultimately measure the performance of the campaign, rather than the short-term financial gain.

• Do you calculate the ROI from your campaigns?
• Do you know your average Lifetime Customer Value?
• What additional metrics do you use to measure success?