This is very logical question to ask about ROI before you make any investment decision. It is a bit tougher and costlier to calculate offline marketing ROI in compare to online marketing. But it is not impossible.
To calculate any ROI, you need two basic things:
- Collection of data
- Connection of data
Collection of data:
First of all, you need to develop infrastructure for building database. Think about online marketing. You install google or any other analytic code in your web page to collect the data. Similarly you need to develop infrastructure to collect the data for offline marketing.
Kind of data required to calculate offline marketing ROI:
If you understand the purchase funnel, you will be able to identify the data required for ROI calculation. It seems that if you know your investment and revenue, you will be able to calculate the ROI. In that case, you may miss couple of opportunities that easily can increase your revenue. You also need to understand that revenue is not your only return, you have many other kind of return like awareness, brand preference, brand loyalty, advocacy etc that has positive impact on your business in long run. As an example, you have run a campaign for one month and ended up with very low revenue doesn’t mean it was wastage. May be a good portion of your target audience has reached to consideration stage, soon some of them will start to buy your product. Rather it will be wastage if you stop the campaign labeling the campaign as failed project. Hence it is important to look into the data in total value chain and identify the area of improvement.
Investment : You need to know the investment data by channel by media by month or week to calculate ROI. Because this is your input to achieve certain objective. Rest of your analysis should consider this data make identify the correlation.
You can get investment data from your media manager, media agency or your finance team.
Reach: Number of people you reached through your investment.
Impression: Number of contact among your reach. You may have multiple contact (known as frequency) with single person, each contact will be counted as one impression. Impression = Reach X Average Frequency
Frequency: Number of time you made contact with the same person. Average Frequency = Impression / Reach
Your media research or media buying agency can provide you reach, frequency and impression data.
Awareness: How many people got to know about your product. You may think that this is same as reach. Unfortunately each and every contact doesn’t generate awareness. There are some factors involve in generating awareness like frequency, relevancy etc. You need a separate research to find your brand or campaign awareness. Most of the company get it in their brand tracker. When you collecting the awareness data, it is a good practice to know the source of awareness that will help you in media optimization.
Engagement: How many people made contact with your brand. This can be done in different way like making call to call center, visiting your website or POS, sending email or sms etc. Definitely you need to build the infrastructure so that your consumer can easily make contact with you.
Brand preference: They like your brand but yet to try. They are your potential buyer.
Sales: It can be your revenue or quantity you sold. Some company try to find how many buyer generated their total revenue. It’s a interesting analysis to find customer share. If you have the sales and investment data, you can do the basic ROI calculation. These are the minimum data required for ROI calculation. ROI= Revenue / Investment X 100
Your brand tracker or Marketing research or Business Intelligence (BI) team can provide you Awareness, Engagement, Brand preference and Sales data.
Now you know required data to calculate offline marketing ROI. Individually these data gives you some insight. But that is not enough to identify efficiency and effectiveness of total value chain until you connect these data with each other. Data connection is nothing but finding correlation with each other.
Connection of data:
Let say you are collecting sales data from one source, awareness data from another source, viewership data from a different source. So you are ending up with 3 different data table. You can do analysis differently for 3 different table but it is not possible to identify one actionable insight for your company until you connect these 3 table. Hence, connection of data is crucial to calculate offline marketing ROI.
How to build the data connection:
As I said earlier, investment is your input for your campaign. Rest of the data is your return against investment. And the very first output of your investment is Reach and Frequency.
Investment vs Reach and Frequency:
At the very first you need to build connection between Investment and Reach-frequency. For brand awareness campaign Higher reach with lower frequency is enough whereas for consumption building you need certain level of frequency to generate sales. Again frequency depends on product type and category. Like, for newer product and short purchase cycle higher frequency is required. Some of the media provides reach and other provides frequency. Hence you need a proper marketing investment mix to maximize your return against objective.
Reach at effective frequency vs Awareness Ratio:
Once you know your effective frequency, your next task is to build connection between reach at effective frequency vs Awareness. Although message has significant role in building awareness, a portion of your reach should convert to awareness. If Reach doesn’t convert to awareness at expected level, you need to relook on message as well as marketing channel mix, effective frequency and media placement
Awareness vs Engagement ratio:
People are aware about your product but they are not engaging! Relook on the engagement channels if those are working properly. Moreover, you need to check if the communication has been deployed to right target audience.
Engagement vs Brand preference ratio:
Engagement level is high but brand preference is not at expected level! Relook at the engagement channel if the consumer has been treated properly. Moreover, product quality has a significant role in increasing brand preference
Brand Preference vs Sales ratio:
People prefer your product but sales is not at expected level! Look at your distribution channel if those are located properly as well as giving the best service. Moreover, price plays a significant role in sales.
There are couple of other data like brand loyalty, repurchase, brand advocacy etc that you can collect and connect to calculate offline marketing ROI. As you can understand, it is comparatively easy to calculate ROI if you invest in one media. Complexity arise if you start investing in multiple media. Because you need to track the consumer journey of audience coming from different source. That doesn’t mean you will reduce number of media to avoid that complexity. Rather start with investing in one media. Then include another media to check if that gives you better return against incremental investment. This
Again, Return is not only revenue or sales, it start from Reach frequency and awareness. So you need to collect and connect data of whole value chain to maximize your return.