The Real Way to Measure Marketing ROI: Customer Lifetime Value


Friday, June 29, 2018
Punchh

While we are bombarded by marketing messages every day through email, TV and social media, the average consumer is largely unaware of the complex cost calculations behind these advertising investments. Truth is, companies spend a lot on marketing and advertising--an expected $2.1 trillion in total media spend in 2019 to be exact. With these massive investments, companies need a way to understand what results these investments are yielding.

Too often, marketers aren’t able to fully understand how every investment is impacting their overall revenue numbers. How can marketers understand if the investment is showing tangible gains in customer acquisition and retention?

What is ROI and Why Should Your Brand Care?

The fundamental metric for understanding the value of any investment is marketing return on investment (ROI). Intuitive as the name suggests, marketing ROI is a measurement of the return on investment from marketing expenditure. For marketers operating in the murky space of loosely defined metrics, marketing ROI offers the concrete benefits of:

1. Holding Marketers Accountable:
Using data to better understand what campaigns are worth a continued or increased investment in, and which campaigns are not providing any value.

2. Comparing Marketing Efficiencies:
Testing different channels to understand where your customers are and how they best like to engage with your brand.

3. Justifying Marketing Spend:
Using data to showcase the direct impact a campaign has had on growing a brand and it’s revenue.

How to Calculate Marketing ROI

Traditionally, brands have calculated marketing ROI by simply subtracting the cost from profit, divided by total cost, as shown below:

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A mere calculation of how much sales increased after a certain “marketing investment”, however, doesn’t tell the marketer anything about what segment of his/her marketing campaign

Easy right? Truth is, a calculation of how much sales increased after a certain “marketing investment”, doesn’t tell the marketer anything about how customers engaged with the campaign and doesn’t account for short or long-term impact on conversion rate, the most important success metric of a campaign. Thus, this traditional way of calculating true marketing ROI is not only outdated, but doesn’t actually inform how to adjust future marketing investments.

However, with new campaign analytics and journey-tracking technology, marketers today are able to more effectively map different engagement points of the customer journey and weigh effectiveness of specific attributes of each campaign. Click-through rate and conversion rate are tracked to specific graphics, calls to action and diagrams. This approach, known as “attribution modeling”, allows for marketers to narrow down and attribute specific values to each segment of each campaign using key performance indicators (KPIs). In other words, a well-designed attribution model should show precisely which aspects of your marketing campaigns are yielding the best results, and suggest campaigns that have the highest probabilities of engagement and conversion. While these methods offer in depth insights into what advertising touch points to invest in, they involve more complex calculations than simple addition of revenue and subtraction of costs, and oftentimes marketers don’t have the right technologies in place to accurately gather the data they need.

Interpretating ROI: Short and Long Term

When analyzing net utility of marketing investments, upper-management tends to look too often at ROI mainly in terms of immediate profits in the short-term. While a CMO knows the importance of investments in branding and image-building campaigns, too often marketers are looking at short-term ROI metrics like cost-per-click. However, it’s also important to consider the long-term ROI of your marketing efforts.

Here is where the concept of Customer Lifetime Value (CLTV) comes into play for marketers. By showing managers how investments influence a company’s ongoing relationship with a customer and how marketing dollars expedite customers along their respective decision journeys, marketers can justify lower returns in short-term MROI with measurable gains in CLTV down the road.

How Restaurants Can Derive ROI With Punchh 

Investing in a solution like Punchh allows your brand to be able to understand the ROI of both your online marketing efforts as well as your offline, in-person efforts. Punchh is able to combine all this data into one system that collects, segments and centrally configures all customer data in real-time, allowing you to record the full purchase history of your known and unknown customers. This enables your marketing team to evaluate on an individual basis what your ROI is per customer. Through features available on our industry-leading Dashboard, you can glean insights into what marketing practices are working on customer-specific level, as well as customer trends more holistically. Punchh can also cultivate that customer through a series of online marketing efforts into becoming a brand loyalist, thereby increasing the overall CLTV and your ROI.

We at Punchh are here for the long run to drive your brand’s performance over the course of it’s prosperous lifetime. We know that long term marketing ROI doesn’t just lie in the profit, but also the customer satisfaction with your brand and cost benefit of their loyalty nurtured over an extended period of time. We help brands turn first time guests into brand loyalists by pairing online and offline data to get a 360-degree view to enable a seamless customer journey using different types of omni-channel marketing offers.

There are plenty of marketing cloud vendors out there who offer all the bells and whistles they think you “need”, but it’s important to first consider which vendor will work with you to ensure you are fulfilling your ROI objectives, and help you make sense of your results. Our dedicated team of implementations and customer success managers here at Punchh works with your brand to ensure you’re on the right track to see the returns in your investment, both in marginal marketing ROI and long-term branding and customer lifetime value. Thus, we work to efficiently allocate your marketing funds toward increasing and magnifying your brand outreach and build positive brand influence that increases the longevity of a customer’s loyalty with your brand.

Start making the most of your marketing investments. Get in touch with us today.


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