Why is marketing return on investment (ROI) so difficult to measure?

Measuring marketing return on investment (ROI) is difficult for 3 core reasons:

  1. Some marketing campaigns don't directly tie to revenue

  2. No standardized method for determining what's included as a marketing cost

  3. Some payback cycles are too long to count

Some marketing campaigns don't directly tie to revenue

A lot of marketing activities involve generating awareness or buzz for our product. The most sophisticated marketers use a variety of techniques to tie awareness to revenue, but this is the exception not the norm.

It's certainly tough to remember any specific ad seen on a visit to Times Square New York and even more difficult to calculate the value of that ad impression.

No standardized method for determining what's included as a marketing cost

Depending on the marketing campaign it may make sense to include certain types of costs in the marketing cost center. The more costs that are included in a marketing campaign, the worse the ROI so marketing managers often get creative with their accounting.

Let's look at an example of YouTube campaign:

  1. Salary of employee for 1 month: $5,000

  2. Cost to produce campaign (actors, equipment, agency, etc): $1,000

  3. Spend to run the media $4,000

Should the cost associated with the campaign be $4,000? $5,000? $10,000? Resources and investment decisions can change drastically depending on your cost barometer.

Some payback cycles are too long to count

While digital marketing has all the promises of perfect tracking an attribution there can be limitations as too how long we are able to track users and their behaviors.

Because of different advertising network policies, country laws and regulations, industry standards, and the type of technology used, the 'window' through which we can track the user is highly variable--sometimes as little as minutes and other times multiple years.

One workaround is to set a standard window by which all marketing campaigns can follow (such as 7 days). Unfortunately, this only works in some industries where the purchase path and time lag to conversion are short. For an industry like real estate, where the average consideration time is well over a year, marketers lose track of a user and then count them a second or third time when they 're-appear'.

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