Measuring Digital Marketing ROI-Tracking 4 types of costs

For mid to enterprise class businesses, measuring digital marketing ROI (ROMI) as a whole can be vastly different to measuring the performance of just media and advertising. While the methods of calculating turnover are unlikely to be too different across these environments, the way costs are calculated will in all probability be radically different between small and mid/enterprise class customers. An intuitive explanation would be that in most smaller businesses, media and advertising costs tend to be by far the largest digital marketing expense. As the marketing activities increase however, other types of costs (in-house staff, outsourcing, software, systems etc.) creep in and severely distort ROMI measurements if costs are assumed to be limited to just media and advertising. At a minimum, companies must consider measuring expenses in at least 4 different cost categories

  1. Media and Advertising-This is by far the most common cost category and its measurement is inbuilt to some extent in most marketing departments. This category would include costs for all paid advertising including sub-categories such as Paid Search, Display, Video, Affiliates, list rentals and also expenses on social advertising. Costs incurred under other outreach activities such as webinar productions and paid blogging etc. would also typically be included in this category
  2. Outsourced services-This category would typically account for all costs of outsourced services involved in the delivery of digital marketing initiatives
  3. Software and systems-Licensing costs of various tools (Web Analytics, Tag Management, Customer Intelligence, Email Marketing, SEO, AdServing etc.) start to make a major chunk of overall digital marketing expense as businesses grow. Costs of hosting and infrastructure should also be appropriated and included in this category
  4. In-house staff costs-This is by far the most ignored cost category when it comes to measuring digital marketing financial performance. Part of the reason is that measuring staff costs requires building internal time tracking and project based accounting processes whereby staff can allocate time to different activities. which take time to operationalize. However, as the size of marketing operations grows, staff costs could grow multi-fold and it is imperative that mechanisms be developed to track this category effectively

With cost data typically spread across multiple stake holder departments and roles, building a consolidated view of costs without a coherent underlying strategy remains a risky ordeal. A highly effective risk mitigation approach for companies looking to expand their ROMI measurement program is to start out by simply tracking ROMI by time and not other dimensions such as channel, campaign, department etc. This reduces the tracking tasks to simply collating information about spend and turnover in various time periods (typically month and above)

From a technology perspective, measuring ROMI using a holistic cost base turns out to be a perfect use case for Digital Marketing Datawarehouses. Using cloud based technologies, Marketers can quickly build consolidated databases containing cost (and turnover) data and connect these with capable Business Intelligence tools to discover compelling insights into not just the cost breakdown of digital marketing as a whole but also around key drivers for ROMI variation