The Long and Short of ROI: Why Measuring Quickly Poses Challenges for Digital Marketers
October 29, 2019
Marketers deliver tremendous, and often unrecognized, value to their business. Yes, you read that correctly: unrecognized. Value is a complex concept that makes it hard to measure and even harder to showcase throughout an organization.
The digital age is awash in data that demonstrates the power of marketing to build brand, produce engagement, generate leads, and boost revenue. So why do marketers still struggle to prove their value and demonstrate ROI?
Recently, LinkedIn conducted research, surveying over 4,000 digital marketers across the globe. And we found that digital marketers are struggling — struggling to calculate their impact, share that impact with key stakeholders, and market that impact across their organizations. This happens because digital marketers are under pressure — from stakeholders and the broader business — to deliver results quickly.
Seventy percent of global digital marketers claim to be measuring digital ROI today, but we’ve found that they are measuring this impact long before a sales cycle has concluded. Meaning that many marketers are likely not measuring ROI at all.
The research we share below identifies key marketer behaviors as it relates to measurement and ROI, delves deeper into their motivations, and concludes with best practices for you to consider.
- Measuring too soon: Digital marketers often measure ROI too quickly
- Mixing metrics: When ROI is measured too quickly (i.e. in less time than the length of the sales cycle), the metric measured is not actually ROI. In fact, the metric measured is a KPI. These KPIs are then leveraged to prove value instead of ROI.
- Marketing under pressure: Internal pressures such as tight budget allocation cycles and proof of performance force marketers to measure and report ROI too soon.
- Missing out on self-promotion: Rushing to measure ROI results in lower marketer confidence in this metric and less motivation to share it.
1. Measuring too soon
One of the key findings of our survey is that digital marketers are trying to prove ROI in a shorter amount of time than the length of their sales cycle. We know that the typical B2B sales cycle can last anywhere from one month to two years — but the average B2B sales cycle usually takes place over six months or more, especially as marketers focus on brand building marketing objectives.
And yet, our research shows that digital marketers attempt to measure the ROI of their programs almost immediately. Why is this a problem? Well, the full return on a campaign cannot be accurately determined until after the sales cycle is completed. For example, how can you determine the value of the leads you’ve produced as a demand generation organization unless you know how many of those leads converted into customers?
LinkedIn’s research shows the tendency to measure performance shortly after a marketing program’s launch.
- We know that 77% of digital marketers are measuring return within the first month of their campaign. And within that group, over 52% of digital marketers knowingly had a sales cycle that was three months or more.
- Even more surprising, only 4% of digital marketers measure ROI over a six-month period or longer, which is the duration we know to be more in line with the length of a typical B2B sales cycle.
We see this trend irrespective of marketing objectives — whether or not a marketer is focused on brand building or customer acquisition.
Through this research, what we started to notice is that marketers are using KPIs and other success metrics to report ROI and long term value.
2. Mixing metrics
When digital marketers begin to think about ROI measurement, it can feel natural to gravitate towards commonly used marketing metrics, such as traffic and clicks. While these metrics might be more readily available, they aren’t really measuring ROI. Instead, they are actually key performance indicators (KPIs), which should be primarily used to optimize. These KPI metrics may be, as the name implies, indicators of a potentially strong return on investment, but they fall short of measuring the true impact and value of one’s advertising investment. KPIs allow marketers to assess the short-term impact of their campaigns, but likely do not tell the full story of the value a campaign (or campaigns) are driving.
Consider the use cases of KPI metrics vs. ROI measurement in terms of reading a book. KPIs tell you what happens after each chapter, whereas ROI tells you what happened after the conclusion of the entire story. KPIs are a forward looking predictor of end performance, whereas ROI is used as a backward looking informer of future budget allocation decisions.
Let’s walk through one example of what this looks like in practice. In our survey, 42% of marketers with a lead generation objective claimed to use CPC (Cost-Per-Click) as their metric for measuring ROI. Why is this a problem?
- First, digital marketers are using KPIs and communicating it as if it were ROI. In this case, CPC is a KPI and does not show impact of advertising dollars spent.
- Second, in their rush to prove impact, digital marketers are often leveraging the wrong metric itself. In this case, digital marketers would be better served to use CPL (Cost-Per-Lead) instead of CPC in order to measure Lead Generation success.
3. Marketing under pressure
Why are digital marketers measuring ROI so quickly? Based on our research, we find that digital marketers appear to be under intense pressure to prove the ROI of their efforts to secure additional budget and earn recognition.
Pressure for Funding
Proving positive ROI enables marketers to earn recognition and additional budget, which in turn incentivizes quicker communication of performance metrics. As such, short-term digital marketers (those who measure ROI in less than one month) are 2x more likely to have budget allocation discussions at least once a month. About half (53%) of those who measure ROI in the short term reallocate spending within a month; whereas, less than one-third (32%) of long-term marketers reallocate over that same time frame.
Why is this a problem? When budget allocation decisions are made on short term performance, marketers might put more money into a campaign that demonstrated initial lift but lacks longevity of impact. This could also mean that channels or campaigns that could be better served by additional funding, but need more time, are shortchanged.
With 58% of digital marketers telling us that they need to prove ROI in order to justify spend and get approval for future budget ask, it is no surprise that there is a rush to measure ROI.
Pressure to Perform
Another pressure marketers face is providing proof of performance to be recognized. Unless you show results, it is difficult to be applauded for effort or success. It then becomes understandable why digital marketers feel the need to quickly demonstrate success rather than waiting until the end of the sales cycle to highlight performance. Of course, there are advantages of measuring short-term to optimize advertising campaigns (e.g. adjusting the target audience and tweaking the messaging), but, as we mentioned above, we found that optimization should be used differently than ROI calculation. Our survey found that 90% of digital marketers begin optimizing their campaigns within a month after they start. And 75% of digital marketers start optimizing as early as two weeks.
It’s interesting because you can’t imagine using this mentality — measuring before a particular advertising campaign has been allowed to influence prospects through the entire sales funnel — with other traditional channels as it would yield misleading results. Imagine if marketers applied this same behavior to their TV Spots? Marketers need to report ROI long term, while identifying the proper shorter term timeframe to calculate, optimize, and report KPIs.
4. Missing out on self-promotion
Marketers are essential to the growth of their organizations, but they struggle to communicate the true value of their contribution. It’s not for lack of trying. According to our research, the large majority of digital marketers measure ROI. Yet only 37% of digital marketers describe themselves as “very” confident in their ROI metrics. This lack of confidence in ROI measurement translates into a reluctance to share.
A Reluctance to Share
In measuring too soon, digital marketers instinctively understand that their metrics fall short of telling a complete story. It’s likely one reason why almost 40% of digital marketers are not actively sharing ROI metrics.
Further data shows that ROI metrics are often shared selectively throughout the organization and not with all stakeholders. For instance, of those digital marketers who do actively share ROI, 47% are just distributing their ROI performance with other internal marketing teams.
Additionally, only 29% of digital marketers share with sales. And about a third (30%) share with Finance. At best, this approach of not sharing ROI across the organization hides marketing’s light under a bushel — it siloes marketing efforts and doesn’t integrate them with the business as a whole. At worst, this approach can call into question marketing’s effectiveness, which leads to hamstringing of budget (which in turn leads to impact of ability to positively affect the bottom line).
ROI: The marathon of marketing metrics
ROI is a marathon, but too many marketers have been busy sprinting. It’s time to rethink ROI. To get ROI right, we recommend that marketers rethink their ROI equations.
Define and measure ROI over the length of your sales cycle:
Marketers should begin using this equation by first identifying what long term return is specific to their objectives. Properly measuring ROI requires defining the R part of the ROI equation. What is the return?
Ultimately, when it comes to ROI, digital marketers must slow down and measure the return on their marketing investment over a longer time period, specifically over the length of the sales cycle. If marketers adopt this approach to ROI, they'll be more inclined to share their ROI metrics within their organization to make better marketing investments.