This article is part of our Incremental Research series. We’re sharing findings from our data and research and turning them into insights that brands can use to make better business decisions that drive incremental sales.
We recently surveyed over 300 ecommerce leaders in consumer packaged goods (CPG), direct-to-consumer (DTC), and retail spaces. We found that 47% of these ecommerce professionals don’t always know where to put their marketing dollars for the best return on the investment (ROI).
In this week’s article, we’re diving into the “why” behind this finding and delivering advice for measuring the ROI of marketing initiatives.
Why It’s Hard to Track Marketing ROI
Deloitte found that marketing accounts for 21.1% of the overall budget across B2C companies that sell products. It’s even higher for CPG companies at 24.4%.
When responsible for over a fifth of the company’s budget, you want to make sure you can accurately track ROI across your campaigns and pivot marketing strategies based on your assessment.
Looking further into our survey results, a few insights shed light on likely reasons why nearly half of these ecommerce leaders find it challenging to know where to put their budget.
Ecommerce is More Complex Than Ever
57% of survey respondents said that ecommerce is becoming increasingly complex. Brands have access to more channels than ever to market and sell products. As a result, it has become increasingly difficult to measure ecommerce and marketing performance in a holistic view.
Difficult to Capture SKU-Level Data
SKU-level data provides insight into which items are profitable, growing or falling in sales, and loss leaders. However, 31% of survey respondents said they feel frustrated that they don’t have easy access to the SKU-level data necessary to make decisions.
Supply Chain Uncertainty
26% of ecommerce leaders said that managing supply chain complexity and uncertainty is one of their top challenges. 29% said that managing inventory, seasonality, and dealing with out-of-stock issues is another top challenge. There’s no faster way to waste marketing dollars than to promote items you can’t fulfill.
Inability to Unify Data From All Online Channels
26% of ecommerce leaders said that they lack the ability to view and manage overall business performance with unified data from all online channels. Data unification enables you to compare customer acquisition costs by channel, track the performance of paid advertisements, and understand your marketing ROI.
6 Metrics That Will Help You Measure Your Marketing ROI
We recommend that ecommerce brands look at these six key metrics to track marketing performance and measure ROI.
- Incremental Sales performance by channel and campaign: Comparing incremental sales across channels and by campaign allows you to identify which channels are meeting your objectives – and which may be misaligned. It is important to keep in mind that strategy, ad type, spend levels, and attribution approach are all important to keep in mind when comparing performance across channels.
- Marketing performance by SKU: Reviewing SKU-level marketing performance data allows you to identify which products are converting, trending up or down, and yielding a better ROI. These insights will help you determine which products to put marketing dollars behind.
- Net Margin: ROAS tells you your return for every dollar you spend on advertising a product, but it doesn’t tell you which SKUs have a higher contribution to net margin. For example, if product A has a higher ROAS than product B, but product B has a higher net margin, you’re likely to see a higher return on product B in the long term.
- Paid Search Targeting: As customers’ shopping trends change, so do their search habits. By tracking your paid search targeting, you can easily see which keywords produce a poor return and adjust your strategy.
- Biggest Movers: Your biggest movers are the campaigns with the most significant change in a specific metric. We often look at changes in ad-attributed sales, incremental sales, ad spend, impressions, ROAS, iROI, and CPC. This will tell you which marketing campaigns are successful and where there’s an opportunity to optimize.
- Inventory Data: Having access to inventory data allows you to minimize the risk of promoting out-of-stock items or wasting marketing dollars on low-demand products. You’ll also be able to better align with the operations team to ensure you have enough inventory for upcoming sales events and paid promotions.
If you need help capturing this data into a single source of truth, we can help. Incremental simplifies the complexity of retail by tracking multichannel performance in real-time and capturing incremental sales that help optimize marketing strategies, boost growth, and maximize profit margins. Talk to us about how you can best optimize your channel strategies and budget today.