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The challenges of measuring marketing ROI

Today, marketing can be thought of as almost equal parts art and science. The reason behind much of this is the increasing growth and importance of marketing technology software or martech. The martech landscape is vast, and according to ChiefMarTech, there are a whopping 8000 vendors populating the space.

With a multitude of specialized solutions available across advertising and promotion, content, commerce and sales and more, many companies choose to pay attention to the makeup of their martech stack, and how different pieces fit together.

Understanding the ROI of a singular piece of technology can be done when that technology fails to do what it’s meant to do. However, when it comes to measuring the ROI of an entire ecosystem, things can get a little tricky.

How Can We Measure Martech Stack ROI?

Before we get into measuring the ROI of a martech stack, it’s important to know what the martech stack is supposed to do in the first place. Jonathan Ward, Senior Manager of Marketing Operations at Spiceworks Ziff Davis, says “An effective martech stack will look different for every organization. The true purpose is to augment, automate, illuminate, and optimize marketing strategies and processes that are already working within your organization.”

But measuring ROI isn’t a one-size-fits-all approach. According to Justin Sharaf, VP of Marketing at Digital Experience Platform Jahia, “It’s never as simple as saying ‘this new technology drove an additional $500k in pipeline’ or My martech stack drove $1M in incremental pipeline.”

In reality, narrowing down ROI can depend on less numbers-driven factors. “It’s often soft metrics like employee productivity increases or a reduction of manual tasks that measure success. Even employee satisfaction can be a measure of success for your martech stack because a marketing team that has good tools will be less frustrated, more productive, and more enthusiastic about their work,” Sharaf continued.

David Snider, VP of Marketing at New York-based cloud management platform CloudCheckr offered another tangible option. “One way to evaluate the return on martech investment is to incorporate its costs into the cost of running campaigns as you would with people and specific incremental spend associated with the campaign,” he said.

“The overall return expected and delivered for the campaign should be met, including the martech costs just like every other campaign costs. Then aggregated over all campaigns you will have a sense of the contribution (or drag) that the martech investment is having,” Snider added.

Methods of Measurement

There are a vast number of methods that can be used to measure marketing effectiveness in some instances, but these methods might not have an impact on ROI. “Micro-conversions are useful metrics for tactical marketing teams, but often don’t show the whole picture related to ROI and ultimately don’t mean much, if anything, to an executive team. Executive teams tend to think in terms of dollars and cents, not clicks, opens or website traffic. These measurements can improve your tactics and help your marketing team optimize, but won’t offer insights into the ROI of your marketing stack,” Ward explained.

Another popular metric used among marketing teams, especially in the SaaS space is customer acquisition cost. “Spend vs revenue, or Customer Acquisition Cost (CAC) is a super valuable success metric AND one that your executive team will love. Other similar metrics include Customer Lifetime Value (LTV) and Ratio of Customer Lifetime Value to CAC,” said Ward.

However, he went on to mention that difficulty attributing soft costs to these metrics means that they aren’t a good option for determining overall martech stack returns.

Sharaf also disagreed on the validity of some of these metrics. “Metrics like Spend vs Revenue are great to measure the success of the overall marketing function, but I don’t think they are appropriate measures of the success of a martech stack. Successful companies may have terrible martech stacks and failing companies may have all the right technologies in their stack,” he explained.

As an alternative, he suggested “doing regular surveys of the marketing department is a fantastic way to measure the success of your martech stack. How many tools are being used regularly? How much more effective do employees feel they are with the technology available to them? What is the NPS of each technology in the stack?”

Initiatives like this are a great way to overcome some of the challenges associated with measuring marketing ROI.

Can We Overcome The Challenges?

Measuring the investment returns for martech can be difficult, but the best approach is to shift the focus on what you’re measuring and how you’re reporting it. “Obsessing over the search for a key metric to support your investment in martech is wasted effort. Redirect that effort into educating executive leadership on the importance of martech, the martech industry growth, and the real-life use cases of martech,” said Sharaf.

ROI is best determined by the benefits that the technology provides. “Showing executives the clunkiness of what you were doing before versus the ease and simplicity of using the right martech can be an effective way to demonstrate value without a martech KPI,” Sharaf added.

“The pros and cons of each method used to determine martech success are seen through the eyes of the evaluator,” Snider remarked. Ultimately, the person determining the budget or the success will be the one to have the final say on how well technology is doing.
By Kaya Ismail