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Return on investment. ROI. The three letters roll off the tongues of every CMO, strategist, analyst, and small business owner as frequently as a Cardi B “Okuuuuuuuurt.”

But marketing mantras, like catchphrases, are easy to remember but hard to quantify. In business, we value black and white, and at its most elemental, calculating marketing ROI looks more basic than a beige blouse: take your sales growth subtract marketing costs and divide the total by the marketing cost.

But while you could base all your marketing decisions on cold, hard math, marketing is just as much about taking calculated risks as it is actual calculations.

Katie Martell, an On-Demand Marketing Strategist at Katie-Martell.com, advises small businesses to take a step back before moving forward on measuring ROI.

“Many small businesses have too narrow a definition of ROI — the impact of marketing can’t always fit into a neat calculation,” Martell notes. “Many marketers are too focused on short-term revenue goals, thanks to our industry’s assertion that driving revenue is the only job of marketing. It is one role marketing plays, not the entire point.

“Marketing’s long-term impact on a business cannot be understated.” 

And, more likely than not, ever truly quantified.

Profitability, and determining whether a certain marketing channel is delivering, often means patience, and patience is in short supply when your livelihood is at stake. The nuance of numbers gets lost as the day-to-day of running a small business means you are making snap, surface-level decisions where all you see is the black and white of a balance sheet.

“I would start, rather than looking for a black and white formula, by defining what business goals are most important to your small business,” Martell said. “Net-new customers in a particular industry? Expanding your footprint in a geographic market? Increasing the deal size among your returning customers? These are metrics than can be measured and indicate the success of marketing towards defined business objectives.”

Finding “the champagne moment” in ROI measurement

Rosie Yakob, who along with her husband Faris Yakob co-owns the innovation consultancy Genius Steals, echoes Martell’s sentiment when she gives advice to her small business clients who want to improve how they measure ROI.

“We start with, ‘What’s the champagne moment?’ At what point are we expensing a really expensive bottle of champagne and celebrating.”

Defining the champagne moment helps a business keep its focus on what the overarching goal is. It’s not about a metric or measurement — it’s about the end goal. The end.

Back to beginning to measure ROI

Identifying the champagne moment doesn’t mean you disavow the sobering path of persistent ROI examination. For small business owners who have ignored the sometimes messy business of ROI measurement, Martell offers this advice:

“Every campaign will have some leading indicators of success – its email open rates, click through rates, meetings booked, pipeline created, et al. These are always helpful if you have the tools to measure them, but they only indicate early traction.

“Open rates won’t tell you how much revenue is actually created and whether you should double down, or abandon a particular tactic,” Martell explains. “Wherever possible, try to connect the dots between a campaign and pipeline it creates. The key is finding ways to turn offline activity, like a speaking session, to online conversion, for example, by offering a free, gated download at the end of your talk.”

Things get even trickier when you try to assign a value to how that hypothetical download impacts your revenue. With the ambiguity that’s inherent in human behavior, it’s best to take a practical approach where flexibility outweighs rigidity.

“The best way to measure ROI is looking at directionality instead of looking at specific numbers,” Rosie Yakob said. “That’s where we really try to focus on. What can we learn from this that will help us do better next time.”

ROI Reporting and Decision Making

To make those better decisions next time, it’s important to have a marketing strategy with clear goal articulation and regular reporting intervals to track your marketing campaigns. Reporting, whether on a weekly, monthly, or quarterly basis, helps you track towards that “champagne moment.”

But don’t waste time entering numbers into cells if you’re not acting on the insights.

“The only thing that should be in your reports should be numbers that when you look at them force you to make a decision and act on them,” Yakob said. “If you’re going to look at Facebook engagement, that’s fine as long as you know what those engagement metrics mean. ‘If it gets to X, we’re going to boost [our marketing spend]. If it gets lower than [X], we’re not gonna put more money behind it.’

“Just writing down numbers for the sake of numbers… If they’re not influencing your decision, what’s the point?”

R-O, I Can Do This

That’s the main point you should take away from this. ROI measurement should influence where you spend your marketing dollars, but it’s not the be all end all. Sometimes instincts and anecdotal feedback are going to be more important than a data point.

So rest easy. As the late great screenwriter William Goldman said, “Nobody knows anything.” He was referring to Hollywood, but his words ring true on ROI measurement as well. The key takeaway for SMBs is to market your small business, measure the effect, re-invest in what works while always experimenting with new channels and ideas. Rinse. Repeat.

But what if you have no marketing budget? Well, we cover that one here. 

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