Return on investment is key, but marketers are short-changing their efforts by trying to measure it much too quickly, according to a new study by LinkedIn.
The professional network surveyed over 4,000 digital marketers who measure their digital ROI on LinkedIn, and it shared its findings in a blog post Tuesday.
LinkedIn wrote: “One of the key findings of our survey is that digital marketers are trying to prove ROI in a shorter amount of time than the length of their sales cycle. We know that the typical B2B (business-to-business) sales cycle can last anywhere from one month to two years, but the average B2B sales cycle usually takes place over six months or more. And yet, our research shows that digital marketers attempt to measure the ROI of their programs almost immediately.”
The professional network added that this is an issue because the full return on a campaign cannot be determined until the completion of the sales cycle, writing, “When budget allocation decisions are made on short term performance, marketers might put more money into a campaign that demonstrated initial lift but lacks longevity of impact. This could also mean that channels or campaigns that could be better served by additional funding, but need more time, are shortchanged. With 58% of digital marketers telling us that they need to prove ROI in order to justify spend and get approval for future budget ask, it is no surprise that there is a rush to measure ROI.”
LinkedIn shared the following findings from its survey to illustrate that what digital marketers are measuring is really the short-term impact of their campaigns, and not ROI:
- 77% of digital marketers measure ROI within the first month of a campaign.
- 52% who measured ROI in less that one month did so on campaigns with sales cycles of three months or longer.
- Just 4% of respondents measured ROI over periods of six months or longer.
- Those that measured ROI in one month or less were twice as likely as those who did so in over one month to have monthly budget allocation discussions.
The professional network also cautioned against using cost per click to measure ROI, saying that CPC is a key performance indicator, but it does not demonstrate the impact of advertising dollars that are spent, and adding that cost per lead would be a better indicator of measuring lead generation success.
LinkedIn found that 90% of respondents were using KPIs to make optimization decisions within one month, with 75% of digital marketers optimizing as early as two weeks into campaigns.
The professional network wrote, “When digital marketers begin to think about ROI measurement, it can feel natural to gravitate toward commonly used marketing metrics, such as traffic and clicks. While these metrics might be more readily available, they aren’t really measuring ROI. Instead, they are actually KPIs, which should be primarily used to optimize. These KPI metrics may be, as the name implies, indicators of a potentially strong return on investment, but they fall short of measuring the true impact and value of one’s advertising investment. KPIs allow marketers to assess the short-term impact of their campaigns, but likely do not tell the full story of the value a campaign (or campaigns) are driving.”
LinkedIn continued: “Consider the use cases of KPI metrics vs. ROI measurement in terms of reading a book. KPIs tell you what happens after each chapter, whereas ROI tells you what happened after the conclusion of the entire story. KPIs are a forward-looking predictor of end performance, whereas ROI is used as a backward-looking informer of future budget allocation decisions.”
Perhaps as a result of the rush to judgment on campaigns, LinkedIn found that just 37% of digital marketers in its study described themselves as very confident in their ROI metrics, while 40% are not actively sharing those metrics with stakeholders.
LinkedIn wrote: “The digital age is awash in data that demonstrates the power of marketing to build brand, produce engagement, generate leads and boost revenue. So, why do marketers still struggle to prove their value and demonstrate ROI?”