January 08, 2020 in Strategy by

Digital marketers have their work cut out for them when it comes to calculating the return on investment (ROI) they are getting for the dollars they spend on marketing campaigns.

In a new survey conducted by LinkedIn, you can see the evidence of one of the biggest challenges they face – when during the sales cycle should ROI be measured. The survey shows that 91 percent of the marketing professionals who were asked begin tracking ROI before six months have passed, with the largest group (34 percent) starting at just one month in. This seems to conflict with longer sales cycles, which 55 percent of those same respondents reported were three months or more.

The survey from LinkedIn suggests that marketers are looking at key performance indicators (KPIs) rather than ROI, choosing to report results to stakeholders quicker to relieve the pressure they’re under to show positive results.

What’s the Difference between KPIs and ROI?

Key performance indicators and return on investment are both tools for measuring the success of specific campaigns or objectives of an organization. They provide businesses with measurable methods they can use to track and analyze their efforts. While both KPIs and ROI can help marketers understand the performance of marketing campaigns, they are quite different.

KPIs are metrics that organizations, or departments within an organization, decide are important for tracking the progress that their efforts are making in specific areas. The KPIs that are monitored will be different, depending upon the goals and objectives of the business or department.

ROI, on the other hand, tells managers how successful a project, campaign, or investment was financially. Did they get their money’s worth? Or did the expenses of the campaign exceed its profits? The calculation for ROI is simple, you divide the total profit of the project by the investment or cost of the project.

To put it simply, KPIs are future-looking indicators of a project’s end performance, and ROI is backward-looking information that helps future budget decisions. This key difference is the reason that LinkedIn’s reporting contends that digital marketers are utilizing KPIs to report ROI to stakeholders. This can create a false or inaccurate picture of what’s really happened with marketing efforts.

What’s the Problem with Measuring ROI Too Early?

The survey found that marketers tend to report ROI in a timeframe that is shorter than their sales cycle. When you consider that a B2B sales cycle can range from one month to two years, with the average around six months, you can see why it’s too early to report ROI – the sales cycle isn’t even over. The actual full return on a project or campaign can’t be determined accurately until the sales cycle is complete.

Yet, the majority of digital marketers who were asked said that they begin to measure ROI fairly quickly after the beginning of campaigns, 77 percent at a month or before. While that’s certainly enough time to track KPIs and monitor performance, it doesn’t allow enough time to report ROI.

How Can Marketers Fix the Problem?

It seems that too many marketers are rushing to report a positive ROI when providing an accurate view of the performance takes some patience. ROI is a long-term (at least the length of the sales cycle) measurement, and that means that it needs to be measured over the length of the sales cycle.

At the end of the day, marketers need to slow down when it comes to ROI. The return on marketing efforts needs to be measured over a longer period of time. As a result, marketers will be able to share accurate ROI metrics within their companies and make more solid marketing decisions in the future.

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