Proving content marketing ROI (return on investment) has become increasingly important in recent years, especially as it becomes clearer how effective content marketing can be when compared to traditional marketing. It’s been shown that content marketing costs 62% less than traditional marketing, yet it generates 3x the leads. However, these types of general statistics are rarely sufficient to ensure budget approval, and therefore it is imperative to build a compelling business case with specific ROI details. Among the many ways to effectively measure content marketing ROI, looking at metrics such as CAC (customer acquisition cost) and LTV (life-time value) are especially relevant for this channel. As such, as we looked at content marketing vs. traditional marketing, we’ve found that there are a few key steps to effectively proving content marketing ROI:
1. Make Sure Your Costs Are Inclusive. The first step to measuring ROI in any use case will always be to calculate the “investment” piece of the equation. First and foremost, there is the cost of your content marketing team. While this may not be any one individual’s full-time job, estimate the number of hours dedicated to the function, and then calculate the fully loaded costs, which should include both salary as well as overhead expenses. Beyond human capital, content marketing costs should also include any agency fees, along with the cost of the different tools and platforms that are utilized specifically for this function.
2. Pick A Revenue Attribution Methodology And Track Your Conversion Rate. Ultimately, the goal of many content marketing campaigns is to generate leads and increase revenue, and this is the start of measuring the “return” piece of the equation. In this case, proving content marketing ROI is heavily dependent on the attribution methodology that is chosen. Within the realm of single-point attribution, you may choose to measure first touch or last touch attribution. However, consider tracking multi-touch attribution, which may be more effective within the context of marketing. Multi-touch attribution will distribute the credit for a given sale across all of the different touches that were required to close the sale. Credit is typically distributed equally, and such a methodology recognizes that multiple touch points are required before a customer is converted. Along with tracking attribution, the second step to building out the “return” piece is to track your conversion rate. The conversion rate is calculated by measuring the number of leads that came over a given period and dividing that by the number of new accounts that were added in a similar time period. One key point here is to account for both your sales cycle as well as any conversion lag. With the former, make sure to measure your conversion rate over your typical sales cycle to accurately capture new accounts in the relevant period. Similarly, if new accounts typically close 1-2 months after a content marketing campaign, shift the measurement period to reflect this lag. For example, if there is a 1-month lag, compare the new customers added in October against leads from September to calculate the conversion rate.
3. From CAC To LTV To ROI. After completing the step above, you should have a sense for the number of leads your content marketing has generated, and the conversion rate on those leads. From the first part, you also have the investment required to generate those converted leads. Utilizing these two pieces, you can calculate your customer acquisition cost (the costs divided by the number of converted leads). Taking this a step further, think about the average lifetime (in years or months) of your clients, and the profit they generate each year or month. The combination of the two gives your average lifetime value (useful online calculator for determining lifetime value). Finally, having completed this process, the final calculation for proving content marketing ROI is fairly simple. The CAC calculated above is the cost, or the investment, required to generate new accounts, and the LTV is the value, or the return, generated from those clients. Therefore, utilizing this methodology, your ROI is simply (LTV – CAC) / CAC.
While there are many other methodologies that can be used when proving content marketing ROI, we believe that this is one way to effectively and quantifiably convey the value of content marketing as marketing teams build budget plans and speak to the profitability of various campaigns. According to DemandMetric, marketers spend over 25% of their budget on content marketing on average, and proving content marketing ROI will be crucial to ensuring continued budget approval.
If you liked “Effectively Proving Content Marketing ROI” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Special thanks to Meha Patel for her contribution and work on this post.