How to measure Return on Marketing Investment correctly
Do you know the TRUE return on your marketing investments? Unfortunately, dividing profit by marketing cost isn’t enough.
Most companies run multiple marketing channels simultaneously (TV, radio, social media etc). As a result, determining whether a change in sales is driven by a given tactic is the hardest part of any Marketing efficiency analysis.
There are two ways to approach this:
1️⃣ Run the marketing activity with a hold-out group to determine the sales lift relative to the do-nothing-different scenario. This is often used for digital marketing, for example by showing a discount code to only 90% of the website visitors. That allows you to isolate the impact of the promotion.
2️⃣ Conduct a Marketing Mix Modeling analysis (MMM). That's a fairly complex statistical analysis. It uses algorithms to isolate the impact of individual campaigns. Many companies use third parties to run MMMs, for example, Nielsen provides it as a service.
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