Why do companies struggle with ROI? Here are 26 reasons
- 70% of CMOs report feeling unprepared to harness the power of their data to make intelligent marketing decisions. (source: HubSpot)
- 52% say achieving or increasing measurable ROI is a top priority this year (source: MarketingSherpa)
- Only 8% of companies say they can determine Return on Investment (ROI) from their social media spending (source: Econsultancy).
The numbers say companies have a hard time figuring out Return on Investment (ROI). No one ever said it was easy. ROI requires a company to:
- Define the return by the financial metric most important to the company’s success (e.g. sales, profit, conversion or shareholder value)
- Account for all out of pocket and internal investments (marketing and operations)
- Determine the length of time (e.g. 12 month or 18 months). It should be done with an understanding of the customer buying cycle and what is the annual customer value.
- Establish the Base Period against which the effort is to prove the ROI
On the other hand, ROI is, after all, just a calculation. Here is the most widely used:
Return (e.g. sales, profit) – Investment/Investment (X 100) = ROI (%).
So why do companies have such a hard time? Here’s 26 reasons companies can’t figure out ROI.
DON’T DEFINE THE DESIRED RESULTS
- 85% use social networks in some way; only 14% tie financial metrics to it. (source: AdAge)
- 87% of marketers want to know how to measure their return on investment for social media activities (source: Social Media Examiner)
- 41% of company respondents report that do not have an ROI figure for any of the money they spend on social media marketing (source: Econsultancy)
- 37% do not mention financial outcomes when asked to define ROI (source: IAB/Columbia Business School)
LEAP BEFORE THEY LOOK
- 84% of social media programs don’t measure ROI (source: Mashable)
- 57% do not base marketing budgets on any ROI analysis (source: IAB/Columbia Business School)
- 28% of CMO’s say their decisions are based on gut instinct (source: Edelman)
- 22% base marketing decisions on gut instinct (source: IAB/Columbia Business School)
IT’S NOT THE DATA, IT’S WHAT YOU DO WITH IT
- 90% of CMOs say social data has impacted at least some of their decisions; only 47% use data to make predictions or forecast sales. (source: Bazaarvoice)
- 80% feel challenged by the amount of data they have to deal with and the difficulty of accessing it. (source: Forrester)
- 81% of marketers would increase spending on digital, mobile, and social channels if they could better track ROI (source: Fact Browser)
- 52% of marketers cite difficulties in accurately measuring ROI as their biggest source of frustration in social marketing. (Source: Adobe )
HAVE INTER-DEPARTMENTAL DIFFICULTIES
- 87% agree capturing and sharing the right data is important to effectively measuring ROI in their own company (source: IAB/Columbia Business School)
- 77% say getting traditional and digital marketing to work better together remains a major goal (source: IAB/Columbia Business School)
- 70% says a “cross-platform model” for ROI on their business is a major goal (source: IAB/Columbia Business School)
- 51% say a lack of sharing customer data within their own organization is a barrier to effectively measuring their marketing ROI (Source: IAB/Columbia Business School )
- 39% say it is important to spend only on marketing activities where financial effects can be measured (source: IAB/Columbia Business School)
- 29% report that their marketing departments have “too little or no customer/consumer data.” (source: IAB/Columbia Business School)
MEASUREMENTS ARE ELUSIVE
- 63% of CMO’s say “ROI will be the standard for their performance by 2015,” yet today only 44% say “I can measure ROI.” (source: McKinsey)
- 39% admit they cannot turn their data into actionable insight (source: IAB/Columbia Business School)
- 37% aren’t able to measure the value of social media (source: Econsultancy)
- 36% of senior executives believe “old favorite” events such as open houses, hospitality functions, fundraisers, and seminars deliver the best returns among localized marketing channels but can’t do direct tracking. (source:Marketing Charts)
- 24% say determining any kind of cost-benefit analysis is a challenge (source: McKinsey)
- B2B CMO’s say demonstrating ROI is their No. 1 concern; yet fewer than 20% say they have the ability to measure it (source: Forbes)
STILL, IT IS A TOP PRIORITY
- B2B CMO’s say demonstrating ROI is their No. 1 concern, yet fewer than 20% say they have the ability to measure it (source: Forbes)
- “How do I measure the return on my social media investment? This question has been top of mind for marketers for the last three years. Clearly very few marketers have figured this one out.” (source: Social Media Examiner)
If your company needs help measuring ROI, consider my eBook, 166 Case Study Prove Social Media Marketing. There are plenty of successful companies that have proven ROI; or Strategic Digital Marketing, where I wrote the chapter, Measurement and ROI; or a Rutgers Executive MBA where I and Mike Moran teach. I teach the curriculum on Measurement and ROI.
Do these reasons explain difficulties your company is having with ROI? Does your company need help figuring it out?