Have you ever asked yourself these questions before launching a PPC campaign?

• Should I spend or not?
• Where should we spend more?
• Who’s responsible for failures? 

Why do these questions arise? Firstly, because each dollar spent needs to be backed up by proof of a dollar of revenue. There are tons of vanity metrics that can give you plenty of applause but zero sales. Only ROI, or return on investment, can give you confidence in your marketing campaigns.

In this article, we’ll tell you how to improve your ROI by completing five steps and answering a series of detailed questions.

Step 1: Check the reliability of data needed for ROI calculations

As ROI is a metric that matters for management and business, the very first questions you have to ask your chief marketing officer (CMO) or data specialist are about data quality. According to research by LinkedIn in 2019, 70% of marketers worldwide are calculating ROI. But there’s no reason to calculate it if your results can’t be trusted. 

By answering the following questions, you’ll be able to ensure the quality of your data collected for ROI calculations:

• Do we include all the data sources we need? 
• Does the payback period fit the time period for our ROI calculations?
• Is the collected data sampled? How precise is the collected data? 
• Is data updated in a timely manner?

These are basic questions that will help you ensure the soundness of the technical aspects of data collection. True sales data is crucial for calculating ROI because if you’re taking approximate values for calculations, you’ll get approximate results. Is that what you’re looking for?

Sometimes the payback period for your service/product might be longer than the period you’re taking into consideration while calculating ROI. That will decrease the precision of your calculations. Decide how you’re going to act if the payback period is longer — calculate total revenue for the full payback period or calculate total revenue for the current period (even if your returns are still coming in) when you actually put the effort into attracting the sale. The approach you choose matters for your business.

Sampling in Google Analytics is the process of building reports based on selected pieces of data. Because of sampling, some data for your reports gets fragmented. Thus, you get a scattered picture of your business’s processes and events. In ROI calculations, you have to be sure you’ve successfully avoided sampling and have all the comprehensive data you need for calculations.

The update period for data collection is essential because you need the freshest data on costs and revenue for your calculations. If the time for performing calculations and updating data are not synchronized, you’ll get a disruption in the data set, which won’t be the best basis for calculations.  

To grow your ROI, your data collection has to be consistent and you have to be sure of the high quality of your tools and data collection methods. If you have doubts about your data, you should inform management about this. Maybe it’s time to deal with these problems first before asking for higher ROI.

Step 2: Check how your metric calculations are set up

As you know, there’s a single formula for ROI. But even so, you can’t find two companies with the same approach to calculating it. So what do you have to ask yourself and your colleagues considering your calculations?

• Are the calculations correct? 
• Is the formula correct? 
• Do we use averages and can we avoid them?

These questions are important from the statistical point of view. You might get used to reporting the average ROI for all channels, but it might mean nothing. The average gives a foggy understanding of the total situation. For example, if one channel brings you 500% ROI and all others bring 100%, you might get a simple 350% average ROI. And while that’s really good at first sight, in reality, you’ll just drain your budget on those low-ROI channels.

If you drill down to the channel level, you’ll get more useful insights than you will by just reporting the average. You might find out that your channel with low ROI might strongly support your high-ROI channel, so you need to keep them both active. Such insights are the key to constant growth.

To get them, follow these instructions by OWOX BI on how to properly calculate ROI.

Step 3: Check the details—currency, returns, taxes

These factors can mess up your calculations if you don’t check them in time:

• Are all currencies the same for all cost and revenue data? (Or is all data converted to one currency?)
• Are returns totally excluded from our ROI calculations?
• Are taxes included in our ROI calculations?

These questions matter for those who care to get an A+ for all ROI calculations. But again, you can’t be sure of your ROI if you can’t answer these questions positively. Because if one of your PPC advertising services charges you in US dollars and another one is more profitable for you to charge in the local currency, like Polish złoty, and you calculate the ROI for this advertising channel without any currency conversion, your results will have nothing in common with reality.

Step 4: Check how ROI is incorporated into your marketing metrics system

As ROI is not exclusively a marketing metric and is closely related to sales and finance, you should incorporate it organically into other departments’ metric systems and be sure that ROI for marketing is calculated the same way as for sales and other departments. To do that, present your results to management together with the sales team. Also, agree beforehand with management and the sales team as to how you’ll answer the following questions:

• How will we calculate and demonstrate ROI? Using a report or dashboard?
• Is the marketing team expected to explain the LTV (lifetime value), CPA (cost per acquisition), and CPL (cost per lead) in connection with ROI? How will these metrics be calculated? What defines these metrics as “good” or “bad”?
• Will we present our sales funnel and marketing funnel to management and how does ROI change across channels?
• Does management expect us to generate advice on where we should spend more money to get better ROI? Or is it not our headache?
• What context events should we take into account while reviewing ROI? What can and cannot explain anomalies of low or high ROI?

This is only a short list of questions that will help you prepare a new approach to calculating metrics. By answering them, you’ll move closer to seeing the true value of your metrics that you calculated earlier based on simple formulas copied from the internet. 

The answer to the most painful question of how to get better ROI for your campaigns is simple: look at your sales and marketing funnel, find the best conversion-generating step, give it a larger budget, and monitor the traffic coming from there. 

Long story short, you should spend more where you generate more profit.

Step 5: Check your attitude and expectations

Once you’re assured of your data quality, it’s time to check your attitude and your readiness to apply the results of ROI calculations. The most difficult change you have to make is to shift from who questions to how questions. Answer these questions to be sure your attitude is professional:

• How can we improve our data so ROI is realistic? Are we calculating ROI because our boss told us to or because we understand why it’s important?
• How do we share our responsibilities with other departments? Are we trying to show how our marketing is working well by caring about our part of the data and ignoring the quality of the sales data?
• How should we act if an error appears? Are we ready to admit our problems and optimise the funnel to improve the total ROI?

These questions are aimed at revealing qualities and principles inside the team and checking your professional maturity and readiness to work to the highest standards of data-informed and data-driven teams. High ROI is a result of talented professionals applying the latest data technologies, so be sure your team is doing that. 

Summing up

There are five steps to growing your ROI:

• Ensure data quality
• Ensure the correctness of calculations
• Check details
• Incorporate marketing metrics
• Tune your expectations

P.S. This isn’t the only way to achieve better campaign ROI. You might also try marketing mix modeling, reviewing your marketing strategy more often, and rebuilding your marketing and sales funnels.