Five Key Metrics and Measurement Methods to Maximize Marketing ROI (MROI)

Investing in marketing is essential to increasing a company's sales.
However, the return on investment (MROI) from marketing activitiesMmarketing Rreturn On ITo maximize “investment,” it is important to measure the effectiveness of each initiative with accurate metrics.

By correctly understanding what is working, you can re-adjust your strategy and allocate your budget to the best tactics to drive sales.

However, it is not easy to understand the effect of marketing measures on sales. Therefore, "accurate evaluation of marketing effectiveness" is a common challenge faced by many marketers.

So how can you accurately measure the effectiveness of your marketing efforts?
Here are five key metrics to measure the effectiveness of your marketing efforts:

What is MROI (Marketing ROI)? How is it different from ROAS?

MROI is an indicator that shows the return on investment in marketing activities. It measures how much profit (or sales) was generated from the amount of money invested in marketing.

The general calculation formula is as follows:

MROI = (profits gained from marketing efforts - marketing investment) ÷ marketing investment × 100 (%)

Many marketers tend to confuse MROI with ROAS (return on advertising spend). ROAS is excellent for evaluating short-term results, such as how much sales a specific advertising campaign generated. MROI, on the other hand, is an indicator for comprehensive, mid- to long-term evaluations that take into account not only advertising costs, but also content production costs, tool implementation costs, and even the value of long-term brand building.

What corporate CFOs and management teams are looking for is not just a partial improvement in ROAS, but maximizing this "marketing ROI indicator," which is directly linked to business growth.

5 Key Marketing Metrics to Maximize MROI

Below are five key metrics for measuring the effectiveness of your marketing efforts. It's important to be aware of which aspect of the customer purchase funnel each metric measures: quantity, quality, or long-term value.

Cost per Lead

Marketing activities such as corporate sales promotions and other initiatives have a certain impact on the increase in so-called potential customers, such as the number of visits to a website and the number of customers visiting a store.

If these marketing measures are implemented for a certain period of time and the number of visitors to the website and store increases, it will provide an indication that the measures are effective.

Therefore, you can evaluate your marketing efforts by calculating the cost per acquisition of new leads.

Cost per lead = marketing cost ÷ additional number of leads (visitors)

However, in most cases, a company does not implement just one measure, but rather implements multiple measures simultaneously, so this method does not allow for a proper evaluation of each individual measure.

Conversion rate/purchase rate(CVR)

It's good to have more visitors to your website or store, but if those visitors don't convert into purchases, your sales won't increase. In other words, it's not just the quantity of potential customers that's important, it's also the quality of those customers that matters.

Conversion rate, or the percentage of visitors who make a purchase or application, can be calculated using the following formula:

Conversion rate = number of conversions (desired actions) ÷ number of potential customers (visitors)　

If the conversion rate increases as a result of implementing marketing measures, it suggests that the measures are effective.
However, this evaluation method also cannot accurately identify which of multiple measures is effective.

Cost per customer acquisition(CAC)

The cost per customer acquisition is the most widely used metric for measuring marketing cost-effectiveness. It can be calculated using the following formula:

Cost per customer acquisition = Marketing cost ÷ Number of new customers

If the cost per acquisition is higher than the profit from your product or service, your marketing efforts are deemed inefficient and you will need to consider adjusting your budget or canceling the efforts.

With this evaluation method, it is still difficult to accurately grasp the effectiveness of individual marketing initiatives.

Average Order Amount(AOV)

Average Order Value (AOV)Average Order V“Average order value” is a metric that measures the average value of all orders placed over a certain period of time. It is calculated as follows:

Average Order Amount = Total order amount ÷ number of orders

In addition to customer acquisition, the impact of sales promotion and promotional measures on the average order amount during the period is also an indicator to look at. If you can increase the average order amount through marketing measures, you can improve your ROI.

If only a limited number of marketing measures were implemented within a period, it is possible to evaluate the effectiveness of those measures, but if multiple measures are implemented simultaneously, it can be difficult to correctly grasp the effectiveness of each individual measure.

Customer Lifetime Value (LTV/CLV)

Customer Lifetime Value (LTV)LifeTime Value" or CLV "Ccustomer Lifetime V“alue” is an indicator of how long a customer will remain with your brand after their first order and how much revenue they can generate in the long term.

Customer lifetime value = order frequency (how often a customer purchases within a given period of time) x average order value x average customer lifetime (1 ÷ churn rate)

If marketing initiatives are evaluated solely based on the cost per customer acquisition and average order amount, they can only be evaluated in terms of short-term profits, but by checking the lifetime value of a customer, it becomes possible to make a fair evaluation that takes into account medium- to long-term profits.

It would be ideal to know the LTV/CLV for each individual marketing initiative, but not many companies are able to perform such analysis.

How to measure marketing ROI in an increasingly complex world

So far, we have introduced five key indicators. However, as mentioned above, when advertising and promotional measures are implemented simultaneously across multiple media, it is difficult to accurately grasp the performance of each individual measure.

So, in today's world where customer purchasing behavior has become more complex, what specific measurement methods should be used to visualize marketing ROI? Typical approaches include the following:

• Attribution Analysis (MTA) : A method of tracking digital customer interactions and evaluating the contribution of each touchpoint to a conversion.
• A/B testing: A method of measuring the pure "lift effect (increment)" by comparing a group that implemented a specific measure with a group that did not.
• Marketing mix modeling (MMM) : A method that uses statistical analysis to comprehensively analyze and quantify the impact that all marketing strategies, both on and off, as well as external factors such as seasonality and competitor activity, have on business results.

An approach like MMM, based on the principles of data science, is essential to measure not only the short-term benefits of digital initiatives but also the medium- to long-term MROI that includes awareness initiatives such as TV commercials and external factors.

If you would like to learn more about a more specific framework for measuring marketing ROI and practical improvement steps to maximize ROI, please take a look at this article for more details.

More details:How to analyze and improve marketing ROI

Summary: Maximizing ROI based on numerical evidence

In this article, we have introduced five key metrics for measuring the effectiveness of your marketing efforts, which are an important foundation for measuring the efficiency of your marketing investments.

However, modern customer behavior is becoming more complex. In an environment where advertising is conducted across multiple media (web video ads, listing ads, TV commercials, etc.) and promotions such as discounts and in-store sales are implemented in parallel, it is extremely difficult to clearly measure the true ROI of each initiative using only a single indicator.

To achieve the "marketing investment that directly leads to business growth" that management is seeking, a more advanced approach is required.Marketing mix modeling (MMM)Utilizing these and other factors to conduct integrated analysis that also takes into account external factors (such as temperature and holidays) will be a powerful tool in future decision-making.

Strengthening investment in effective measures and reviewing inefficient measures based on objective, quantitative evidence. Continuing this cycle is a surefire way to maximize MROI and generate medium- to long-term business growth.

If you're interested in learning more about advanced measurement techniques and data science-driven decision-making, check out the resources below:

Learn more about analytical methods
Marketing statistics andThe basics of multiple regression analysis (Click here for a guide to multiple regression analysis in Excel), and quantify all measuresFor more information on how MMM works, see this articledoing.

Build an environment for maximizing ROI
Looking to bring integrated analytics to your organization?Details of the MMM analysis platform "MAGELLAN"Please take a look at this article to find out how to accurately measure the effectiveness of your marketing efforts and improve them to optimize your overall efforts.Consult with XICAplease .

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XICA Co., Ltd. Marketing Team