Investment in marketing activities is growing fast. Marketing spend soared to $1.3 trillion dollars worldwide in 2021, accounting for 2% of global GDP. As companies spend more, they need to know whether their significant investments are paying off.
There’s a myth in the marketing world that certain questions about return on investment (ROI) simply can’t be answered. Some marketers claim that, unlike in the B2C space, B2B revenue attribution is too complex to calculate.
The good news: everything in marketing is measurable with the proper resources, investment, and knowledge. In this report, we share our wisdom to help demystify B2B marketing ROI. When you’re done reading, you’ll walk away with an understanding of why ROI is important and how to measure and use it to maximize your marketing dollars.
What is marketing ROI, and how do companies use it?
Marketing ROI (MROI) measures the profit from your total marketing spend. Fundamentally, MROI reports on the difference between the cost of your marketing activities and the money those activities generate.
Companies use ROI to optimize their marketing spend. After all, budgets are finite—every dollar is vital and could be spent elsewhere. ROI validates existing spend and provides strategic insight on which channels to prioritize for future investment.
The marketing ROI formula
ROI is typically measured as a percentage or a ratio. To calculate the percentage, you subtract the total amount you spend on a campaign from the amount the campaign generates, then divide that profit by the total spend.
Let’s say you spend $1,000 on a campaign, and the campaign generates $2,000. The difference between these amounts is $1,000. $1,000 (the difference) divided by $1,000 (the total spend) is equal to 1. Expressed in percentage form, this represents an ROI of 100%.
Calculating an ROI ratio is even easier. All you have to do is divide your return by your initial spend. In this case, $2,000:$1,000 simplifies to 2:1— that is, a $2 return for every $1 spent.
Sounds easy? It can get tricky when the return itself is difficult to measure or attribute. But the basic concept remains the same, no matter what channel or campaign you are measuring.
What is a good ROI in marketing?
As a general rule of thumb, good ROI in marketing is considered to be a ratio of 5:1. In other words, marketers should be looking for a $5 return for every $1 invested in marketing activities. By measuring the right KPIs and timeframes, you can maximize the impact of each dollar spent.
Why B2B marketing ROI is difficult to measure
Difficulty measuring ROI is the number one challenge that B2B marketers face. Measurement can be tricky for a number of reasons. It’s often hard to know which revenue was impacted by which campaign—this is known as revenue attribution. This is because B2B sales cycles can be long and complex, with multiple touchpoints leading to closed deals.
Even when marketing organizations do invest in adequate ROI measurement, many select the wrong metrics. This means that ROI measures will be skewed from the start. One measurement in particular, lifetime value (LTV), is crucial for generating accurate B2B marketing ROI calculations.
Why lifetime value is critical when calculating marketing ROI
In the B2B world, the sales cycle is typically much longer compared to what you see in B2C. The conversion often happens months, if not years, after the initial touchpoint. This is why cultivating a relationship with your customers through multiple touchpoints can pay dividends years down the line. You need to take this into account when calculating ROI.
Lifetime value (LTV) is a way of measuring the return on an ongoing relationship with a customer. While we can’t know the exact course that a buyer’s journey will take, we can make predictions about it and incorporate those predictions into our reporting. Metrics like average revenue per user (ARPU) and retention rate allow us to estimate the LTV of a given customer. LTV can help justify B2B marketing efforts whose results are not immediate.
How to measure marketing ROI
Before you measure your marketing ROI, it’s important to step back and connect each marketing initiative to your business goals. Taking the time to set up a proper reporting foundation will save you time, money, and headaches down the line.
1. Build a comprehensive reporting foundation
Building a stable foundation is a critical first step to helping grow your ROI capabilities. It’s important to note that there’s no “one size fits all” approach to building a reporting structure. What it looks like ultimately depends on the maturity of your marketing organization.
Companies earlier in their marketing journey may focus on simply counting the leads directly generated from each campaign. More mature marketing organizations will likely have a multi-touch attribution model tracked by software, which is much more complex and detailed.
To help identify which attribution model is right for you, and to ensure you build the most comprehensive reporting foundation possible, mature marketing organizations leverage the knowledge and support of marketing operations teams. Since there are so many edge cases and detailed customization needed, having talent in-house who understands the business and is able to dedicate significant time to this is a critical component to measuring ROI successfully long-term.
To help you decide what your reporting process looks like, you should ask yourself some questions including:
- What are your marketing team’s goals? Your ROI reporting will look different if you are looking to expand into new marketing channels, validate your current methods, or make the case for additional budget. Having clear goals before establishing a foundation is a must.
- Are your marketing goals aligned with your revenue goals? Research has shown that siloed sales and marketing teams are ineffective. Demand generation works best when the two teams operate with shared goals and in mutually supportive ways.
- Do you want to look at campaign- or channel-level results? Campaign-level reporting combines the ROI of multiple channels related to the same initiative into a single report. Channel-level reporting consolidates all ROI across a single channel (i.e., email, display, organic), regardless of campaign.
- What time period do you want to look at for attribution? You may want to set up weekly, monthly, quarterly, or even yearly reporting, depending on the channels you care about and your business model.
- Which attribution model do you want to use? Attribution models tell marketers which touchpoints in the sales cycle led to revenue, allowing for ROI calculation.
Attribution can be complex, but there are several common models that marketing leaders should know.
- First Touch is the simplest, where attribution credit is given to the first touchpoint that a prospect interacts with.
- Lead Creation attributes 100% of the credit to the point at which a prospect provides their contact information. Multi-touch models get a bit more complicated.
- A U-Shaped model divides credit between first touch and lead creation touchpoints.
- While a W-Shaped model also incorporates the moment an opportunity was created.
- The Full Path model is the most comprehensive, dividing credit between all the major touchpoints.
The attribution model you choose can profoundly impact your ROI calculations, making it important to set it up right from the start based on your specific business needs. While there is no right or wrong choice, the attribution model you choose should be based on your specific strategy and campaign objectives. Today, the most common type of attribution model for B2B enterprises is one that provides multi-touch attribution, which gives credit to each piece of content or channel a prospect interacts with on their journey to the final conversion.
“At Conductor, we rely on a multi-touch attribution model. By being able to report on every step in the customer journey, we’re able to get specific insights on which content, campaigns, and website pages are impacting that journey—providing the data needed to maximize ROI by investing in the efforts that drive customers further down the funnel.”
– Ellie von Reyn, Director of Demand Generation at Conductor
Multi-touch attribution models are more prevalent as a result of the shift to digital transformation. Marketers and leaders want to better understand a customer’s entire buying journey vs. just the first or last step they took in that journey.
2. Clean up your data
Inaccurate data is the Achilles heel of ROI attribution. If you don’t have clean data, you will struggle to attribute conversions (or any metric) to specific campaigns.
3. Determine costs
How are you thinking about the costs of your marketing efforts? As mentioned, certain types of marketing campaigns have clear associated spend, but thinking more broadly can uncover hidden costs.
4. Leverage the right technology
Having the right technology to measure revenue attribution is key. If your tech is inadequate or set up incorrectly, attribution turns into a fragmented, manual process that eats up your team’s time. Manual reporting fails to provide real-time insights that allow you to pivot if something isn’t producing results.
Access the Ultimate Guide to Marketing ROI for more comprehensive insights and tips on how to measure marketing ROI effectively for your business.
Paid vs. unpaid: How to measure ROI without an associated cost
Not all ROI calculations are created equal. Paid channels like PPC, display ads, and retargeting have clear costs and returns associated with them, making ROI easier to measure using the above formula. Meanwhile, so-called “unpaid” channels like organic marketing do not always have a directly associated line item. How can you measure the ROI from such channels?
To verify you are properly calculating ROI for your unpaid channels, you need to ensure that you are holistically looking at your marketing investment in said channels. Your investment includes hard costs like agency or contractor expenses and technology but should also incorporate your team’s time investment. You could do so by using the sum of the annual salaries of your SEO/content marketing teams, combined with your total spend on marketing technology.
It’s worth noting that using this comprehensive approach to ROI for your unpaid channels should also be leveraged for reporting on your paid channels in order to ensure you are capturing your true marketing cost.
SEO ROI: Is it possible to measure?
SEO strategies tend to fall into three buckets: net new content creation, technical SEO, and on-page optimizations. Calculating ROI from these efforts is indeed possible, but you may have to rethink what you’re measuring. Here are the steps you should take to measure SEO ROI:
- Determine your business objectives
- Connect each task to a specific objective
- Draw a correlation between task and objective using metrics
Best practice for measuring SEO ROI
When measuring SEO ROI, you cannot think in silos. Technical and content SEO investments build off each other—they must be made together in order to see an impact. Technical SEO changes alone won’t work if you don’t have quality content. Similarly, quality content can only go so far if Google struggles to read your site. Investing in both technical site health and net new content creation at the same time is necessary to seeing success.
FAQs on marketing ROI
Measuring ROI will never be perfect. The real world is complicated, and the buyer’s journey is more multifaceted than ever. But ROI is still tremendously helpful in making informed decisions about your spend and communicating the results clearly to fellow executives.
How should you be measuring your marketing ROI?
How you measure marketing ROI depends on your business objectives and organizational maturity. Generally speaking, you should choose a revenue attribution model that reflects the buying habits of your target customers. Then, set up reporting to guarantee that you can take action on insights gleaned from ROI calculations.
How is SEO ROI calculated?
SEO ROI is calculated the same way as any marketing ROI: by dividing your profit from the channel by your total spend on the channel. What makes calculating SEO ROI different is that it is a long-term investment that yields long-term results and provides more value to your brand than conversions alone.
For example, you only measure a paid media campaign for the short timeframe it runs for. Whereas with a piece of evergreen content like an eBook, the asset will likely remain “live” and drive results for years. It continues to perform long after the initial investment is made. Additionally, organic marketing and SEO yield other top-of-funnel benefits that aren’t captured by conversions or revenue—like brand awareness—but are still valuable.
How long does it take to see ROI from SEO?
The common talk track around SEO is that it’s a “long game” based on the assumption that it takes a significant amount of time to see results. However, you can actually begin to see traffic and conversions on an optimized asset you publish fairly quickly. So the time it takes you to measure that asset or optimization’s revenue impact—the time it takes for deals to close generated from the touchpoints where users interact with that content—depends on the length of your sales cycle.
How do you measure ROI on a website?
You can measure ROI on a website by dividing the profit from marketing activities by the total spend on those activities.
For additional, exclusive insights and a more in-depth rundown on marketing ROI and SEO ROI, access the complete Marketing ROI Guide now.