calculating roiHow do you measure marketing?

With buzz words like ‘viral-marketing’ and ‘growth-hacking’ causing advertisers and brands alike to froth at the mouth, dizzy with the low-cost, high-return possibilities of conducting drive-by  marketing campaigns, sometimes it can be easy to forget that all forms of marketing – no matter how clever or bleeding edge – need to be accounted for.

Without the ability to measure cost and return, we are flying blind and tossing money at challenges without any idea about the effect that our effort is having. Legendary advertising pioneer John Wanamaker laid out this problem succinctly in his memorable quote about marketing spend; “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”.

While some forms of marketing may be harder to account for than others, that doesn’t absolve us of the responsibility to try to measure it as well as we can. Let’s investigate ways to do that with our guerrilla marketing campaigns.

Solving the ROI Puzzle

For a metric that seems like it should be a fairly basic calculation, working out the Return on Investment (ROI) for marketing campaigns can be a disarmingly complex business. The lowest-level version of the calculation looks pretty simple:

ROI calculation

The source of the complexity arises when we try to take into account the variables that come into play at each step in the calculation. We also have to understand that different companies can utilize a wide variety of metrics to complete the calculation. Consider, for example, what happens when we use gross profit instead of net profit, or don’t include multiple touch-points along the marketing funnel?  The numbers can end up looking entirely different.

What happens when your return on investment isn’t as simple as units sold? What if the point of the campaign is awareness, or subscribers, or even retweets, for example? That’s when this type of calculation can feel almost impossible to decipher. However, companies big and small continue to pour time, energy and money into guerrilla marketing, so there must be a way, right?

Begin with the End in Mind

The starting point of any guerrilla marketing campaign should be the desired end results. Is the campaign designed to raise awareness or increase sign-ups? Is it designed to catalyze action on social media networks, or increase conversions? Once we have these clearly defined objectives within our scope it will make it easier for us to quantify the (hopeful) success of the campaign.

In order to measure anything you have to start with concrete numbers. We’re not talking about vanity metrics here either – these need to be solid measures with real impact.

Here are some of the metrics that we can track to measure the effectiveness of a guerrilla marketing campaign and quantify its ROI:

  • Response Rates
  • Social Media Mentions
  • Conversion Rates
  • Referrals
  • Sign-ups
  • Traditional Press Mentions

Depending on the type of campaign that you’re running, these metrics can be combined with more traditional measurements like sales, redemptions, contact lists, etc. Guerrilla marketing may be physical, digital or both, so the combination of metrics used can be very sophisticated. The primary goal, however, is to quantify the value of each action in order to put a number on the return. This means that you need to place a nominal value on non-transactional digital actions, such as tweets, likes and plus-ones. A more in-depth look at how to calculate the ROI on social media marketing can be found here.

The key, then, is to place a value on non-traditional customer actions in order to at least summarize a return value. Sometimes this may feel like more art than science, but it’s a necessary step in accounting for guerrilla marketing and new media campaigns.

What experience have you had with calculating return on investment with non-traditional marketing campaigns? Do you feel that guerrilla marketing is inherently nebulous, or do you think that methods like this give us a good idea of the returns?

Let us know your thoughts in the comments section below.

About Jacob:
Jacob E. Dawson works with Delivery Hero, helped launch their new Home Delivery mobile app and is an entrepreneur and inbound-marketing consultant with a passion for creating value! Follow Jacob on twitter @jacobedawson and on Google+.