We all know how to calculate Return on Investment, the difficulty comes in rounding up all the Returns and all the Investments. Agencies and marketers attempt to simplify things by calculating something called the Return on Ad Spend (ROAS), which includes only media costs paid to publishers. While it certainly makes everyone happy to see a high ROAS, it’s a red herring that should be tossed out before it starts to smell any worse.
How do you compare the ROAS of a Google AdWords buy to the more labor intensive efforts involved in a social media campaign? A trade show and its travel, time and production costs to those of a print ad? The only way to accurately begin to measure and predict true marketing ROI is to incorporate ALL marketing costs, including production, travel, fees, commissions, and, most importantly, the value of the time put against the campaign by you and your team. Once you begin to incorporate ALL the costs, you can compare the overall cost of a campaign and its projected or actual results to those of other marketing campaigns on a more equal footing. Two weeks of staff time to build and promote a new Facebook promotion, or would $10,000 in media and fees produce the same results? Sure, that trade show booth is only $5,000, but the associated costs of travel, production and staff time can far exceed the cost of the booth space.
On the Return side of the ratio, you may also want to expand your horizons and ascribe values to secondary activities, as well as to acknowledge (and measure) the indirect impact of your marketing in areas such as creating awareness, driving site visits and stimulating customer engagement. Some retail studies suggest that marketing campaigns may drive up to 7x more indirect, non-attributed sales than trackable orders. If you’re not attempting to model and account for that 7x how accurate can your projections be?
Start by working backward from an allowable cost per sale, and then use your knowledge of conversion rations to calculate a projected cost per lead, per engagement, and per visit. Determine the true cost of your staff on an hourly, weekly, or even project basis. Remember, there is opportunity cost in every decision to deploy staff against one campaign or objective vs. another. Add up ALL your marketing costs, divide them by the projected numbers of visits, engagers, leads, sales and even lifetime value of a new customer. If the numbers don’t pencil out, can you reasonably expect to make improvements in any of the phases of the marketing campaign, either through reducing costs or improving performance, that might bring them into line? How do your predicted costs per visitor/engager/lead/sale for this campaign compare to your overall averages? Often times it may be more effective to put additional money against an existing campaign than to allocate the resources necessary to create an entirely new effort.
It’s not that hard to calculate and predict marketing ROI once you have all the figures, and it’s worth the extra effort to ensure your results aren’t, shall we say, fishy?
Many sites use data such as session duration and number of pages viewed per session as basic gauges of engagement. While these are good rudimentary measures, we have developed an Engagement Scoring Model that we believe provides a more detailed and accurate view of site engagement. Based on the principles of lead scoring as used by many b-to-b sites, our Engagement Scoring Model ascribes specific values to a limited number of key pages and actions on the site. The Model is built in Google Analytics, so it can be accessed through your usual GA account and requires no additional software or licenses.
The first step is to assign subjective values to each page or action/event on your site that you want to track. We say subjective because, just as in b-to-b lead scoring, these values are not absolutes and probably cannot be derived mathematically, yet most site owners have a good subjective sense of the relative value of their key pages and actions. Set each of these key pages or actions as a Goal in Google Analytics, and assign the Goal Value. We recommend using a scale of 1-100 for your Goal Values, as you’ll be dividing the Goal Value by the number of sessions and this range yields numbers that can be rounded to whole numbers rather than working in decimal values. For example, let’s assume that your site includes the following pages to which you want to assign Goal Values.
|Shopping Cart Entrance||50|
|5+ Pages Viewed||20|
|10+ Pages Viewed||40|
If you need a primer on setting Goal Values in GA, we recommend https://support.google.com/analytics/answer/2907896?hl=en.
Within 24 hours, you will be able to view the Goal Values in Google Analytics in Conversions/Goals/Overview.
A sample of the Engagement Scoring Model in Google Analytics
Ignore Goal Completions, this is just a count of the total number of times that any Goal has been completed and is irrelevant to our purposes. Note that the Goal Value is $64,245. Ignore the dollar sign, as we’re using Goal Value as a points system rather than trying to assign accurate dollar amounts to each Goal. The next step is to divide the Goal Value of 64,245 by the number of sessions to derive the average Engagement Score per Session. Assuming that you had 1700 sessions during the period, this would yield an average Engagement Score per Session of 64245/1700 = 37.79, which you can round up to 38. You now have a baseline Engagement Score per Session. You can use this baseline going forward to evaluate the average Engagement Score per Session for various traffic sources, or just to judge the overall health of your site.
Note that you are limited to 20 Goals in each GA View; if you need to track more than 20 Goals you’ll either need to segment your Goals into multiple Views and then use a spreadsheet to aggregate the scores, or, more simply, group similar pages with similar URLs into a single Goal, such as using www/YourSite.com/products… as a “begins with” Goal in GA and accept one value for all Products pages. In an upcoming post, we’ll detail how to use the Engagement Scoring Model to measure how well specific pages on your site are engaging your visitors.