What is the most important factor that comes to your mind when you think of investing in something? Or when you decide to start a business? Or a marketing campaign? Well, I cannot think of anything else except for the “effectiveness.”
You always ask yourself, “Will this be an effective investment”? Or “is it going to be an effective marketing campaign?” But the question is, how do you define the term “effectiveness.” How would you know if your marketing strategy has been effective or not? If you don’t, fret not; this is exactly what we are going to discuss in this article- Marketing effectiveness. Moreover, we will also discuss different ways to measure the effectiveness of your marketing strategies. Let’s start with the definition.
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What Is Marketing Effectiveness?
Marketing effectiveness, in simplest words, means how effective your marketing is. It means, is your marketing good enough to achieve the short-term and long-term organizational goals? In other words, marketing effectiveness is a criterion where you evaluate whether you succeeded in achieving what you wanted to achieve with your marketing strategies.
Basically, marketing is an investment, and as an entrepreneur, you have to evaluate whether your investment is worth it or not. Now, coming to the point, how would you know if your marketing strategies or campaigns have been effective or not? The answer lies in the next section.
8 Ways to Measure Your Marketing Success
Alright, in this section, we will discuss different ways to measure the effectiveness of a marketing campaign.
Return on Investment
Return on Investment or ROI is one of the best tools to measure the effectiveness of your marketing efforts. ROI is a simple measure in which we consider two things.
- Amount spent
- Sales generated through the amount spent.
For instance, if you spent $1000 on a marketing campaign and generated $10,000. Your ROI will be $9000 or 900 percent. ROI is an effective benchmark because it also tells you the quality of leads you have generated through your marketing campaign.
Here is the formula for calculating Return On Investment (ROI) = Total Sales Generated From The Amount Spent – Amount Spent
Customer Lifetime Value
Honestly, any marketing campaign is “useless” if it fails to grab long-term or repeat customers. Customer lifetime value is another way to measure the effectiveness of a marketing campaign. The formula includes three ingredients, including;
- Average sale per customer
- The average number of times a customer makes purchases per year.
- Average retention time in years for a specific customer.
The formula is simple; A×B×C.
Although it is pretty difficult to compile the data in such a form, it can give you very accurate figures related to the effectiveness of your marketing campaign.
Cost Per lead
If you want to measure the cost-effectiveness of your marketing campaign, “cost per lead” is the option you can use. This benchmark only focuses on the number of leads you have generated with your campaign. However, this benchmark doesn’t account for the total sales. This means the quality of leads generated by this campaign is also out of the equation.
Let’s develop a better understanding with the help of an example. Suppose you spent $1000 on a campaign and generated 20 leads, but only 10 leads turned into actual customers and gave you total sales worth $10,000. The cost per lead in the situation will be $50.
Cost Per Lead: Total Amount Spent in Marketing Campaign / Total Number of Leads Generated
Cost Per Sale
CPS or cost per sale is another metric to evaluate whether your marketing campaign is doing fine or not. The formula for this one is quite simple; it includes two ingredients;
- The total amount you spend on a marketing campaign
- Total number of sales
Cost Per Sale: Total Amount Spent on The Campaign / Total Number Of Sales
Suppose you spent $1000 on a marketing campaign which brought 10 sales. According to the formula, the cost per sale will be $100.
Generally, we associate the conversion rate with websites, but you can apply this metric to your other marketing campaigns as well. The formula is pretty simple and consists of two elements.
- Total number of leads generated.
- Total number of visitors which a campaign brought.
Conversion Rate Formula: Total Number Of Leads / Total Number Of Visitors Brought By The Campaign
Let’s say you spent $1000 on a marketing campaign which brought you 20 leads. The conversion rate, in this case, will be 2 percent.
You can, and you should also evaluate your marketing campaigns’ effectiveness with the help of your sales process or purchase funnel. The sales process involves various steps; let’s say you are monitoring a digital marketing campaign, you can use Google Analytics to evaluate the whole process. For instance, you can evaluate where your traffic is coming from, how long does it take for your prospects to place an order, percentage of visits, leads, interactions, etc. This evaluation tells you about your weak points where you can make improvements.
Data enrichment is an indirect way of measuring your marketing campaigns’ overall effectiveness. Data enrichment means enhancement of collected data with a relevant context; this data is collected from additional/external resources (third party) and is merged with internal data (first-party).
Now data enrichment may not be a direct metric to measure the effectiveness of your marketing campaigns. Still, it helps you to interpret the information easily. Make no mistake; real-time data is vital for maximizing the return on different marketing campaigns.
Apart from that, data enrichment is also very helpful in decision-making. These decisions may include cost management, strategy implementation, etc. You will be able to make better decisions with timely information, which also includes modifications or adjustments in your marketing strategies.
Yes, it is easy to evaluate the effectiveness of a marketing campaign if you only focus on one marketing channel. However, modern marketing strategies always consist of multi-channel marketing.
For instance, your marketing campaign may include email marketing, social media marketing, content marketing, paid digital marketing, etc. Therefore, you need to evaluate all marketing channels to determine the overall effectiveness of your marketing campaign. Here is how you can do that.
- Email Marketing. If you are using email marketing in your marketing campaign, you can evaluate its effectiveness by bounce rates, click-through rates (CTR), and conversions.
- Social Media Marketing. Social media is a massive platform to generate leads, and it is easier to analyze its effectiveness. For instance, a business can easily determine the number of inquiries it had on social media platforms, how many of those inquiries became your potential customers, and how many actually became your customers.
- Content Marketing. You can generate leads by creating valuable content. That is, you can generate leads through your blog posts, informational articles, etc. Let’s suppose you have a blog that contains informative articles related to your services. Still, if you are unable to generate leads through your blog, it means you are missing something, and you need modifications. It may be due to irrelevant information, poor quality content, or no clear call-to-action (CTA)
- Paid Digital Advertising. Paid digital advertising is an integral part of any marketing campaign in modern-day organizations. Common examples include Facebook ads, Google ads, etc. The purpose is to bring traffic to your website and introduce them to your products or services.
Paid advertising is pretty expensive, so you need to determine its effectiveness, i.e., the number of leads generated, conversions, and actual customers brought through those advertisements. Your main focus should be on the costs of getting a customer rather than the costs of generating leads.
Evaluation is mandatory when it comes to your marketing campaigns. You simply cannot implement a marketing strategy and wait for things to happen as expected. There will be deviations, and that is why you have to keep looking for “loopholes” and rectify them to achieve your organizational goals. Every method to measure your marketing success has its own perks and drawbacks. However, to get more accurate results, it is better to use multiple metrics to measure your marketing effectiveness.