I’ve been working on some figures to get a better idea of what we’ve been spending our significant marketing budget on (nearly 4% of our revenues is dedicated to marketing); and I thought I’d discuss Marketing ROI again. It’s a concept that has gained significant popularity in the last 20 years; mostly driven by the need to actually justify the existence of a marketing department and it’s budget.
It’s actually an area that I have found interesting for years – I did my Masters thesis on accounting and marketing and the lack of integration more years ago than I’d care to admit. Understanding what generates the most revenue for you in theory allows you to then adjust your tactics and spending for future years.
Marketing ROI simplistically is the return on each marketing tactic. For example – how much revenue do o our advertisements on BGG return? How about theSpiel? Or 2d6? The equation at its simplest is ROI = Revenue Generated / Cost
At first glance, this seems rather easy to do. You have an Analytics program in-place. Customers who clicks through from an advertisement is registered as coming from that advertisement. If you make a purchase, you then can attribute that purchase to that customer. Take that number and divide it by the cost and you have your ROI numbers.
Well, not exactly. We have to add in a few factors to this like:
- time-lag between awareness to purchase
- contribution of other advertising efforts (e.g. maybe they decide to buy only after they see a Facebook post about a new game they liked)
- Free Shipping costs (we do actually still pay shipping after all)
- Indirect Costs (e.g. time cost of set-up and management)
- Seasonality and time period
All of these factors have to be tracked down and entered if you want a more accurate cost and the amount of revenue generated.
Oh my head hurts
Then there are those factors that really complicate matters like:
- Non-attribution by Google Analytics (they have been stripping out data for a while now)
- Lack of cookies (customers might wipe their cookies or refuse to take them at all)
- Cookie expiration (they only last for so long, so a customer who buys after the cookie expires is no longer tracked by that method)
- Passive interaction (e.g. seeing our banner advertisements in BGG but only clicking through Google)
- Branding efforts (like our videos where the goal isn’t to necessarily generate revenue immediately but increase awareness)
- Design changes on the site (hey, we made that button bigger; maybe it’ll help with our ROI)
In many cases, a lot of this data can be tracked down if you have the budget. Branding efforts can be given a monetary value by surveys; design changes by doing A/B testing, etc. To get more and more detail though, it’ll cost you more revenue and time and at a certain point the returns just aren’t there.
It kind of reminds me of Galaxy Trucker – you can spend all your time building up your ship or perhaps take a bit of time to peak at the future, but at the same time you’ve got competitors hard at work as well. You have to balance both the building phase; the knowledge phase and the speed of your work or else you’ll just be left behind. Oh – and be just a little lucky 🙂