In the world of marketing, Return on Investment (ROI) has long been the golden metric. Whether it’s tracking the effectiveness of a digital ad campaign, evaluating the performance of email marketing, or measuring the success of a new product launch, marketers and business leaders alike have relied on ROI to determine where to allocate resources, what strategies are working, and what needs improvement.
But in today’s complex and highly fragmented digital landscape, is ROI still the ultimate measure of marketing success? Or has it become a fantasy, an outdated, overly simplistic metric that fails to capture the true value of modern marketing efforts?
The Traditional ROI Model: Simple but Flawed
Historically, Marketing ROI has been described with a straightforward definition - Marketing ROI is the amount of sales your marketing efforts drive minus the associated costs.
In a world where marketing was predominantly about one-way messaging—TV ads, print campaigns, and direct mail—this formula worked. If you spent £100,000 on a campaign and generated £500,000 in sales, your ROI was 400%, and it was relatively easy to connect the dots between spend and revenue.
However, in today’s digital-first world, where consumers interact with brands across multiple touchpoints, channels, and devices, the old ROI formula has become increasingly insufficient. The journey from awareness to conversion is no longer linear, and attribution—or the process of assigning credit for a conversion to the right touchpoints—has become more challenging than ever.
The Digital Landscape: Complex, Fragmented, and Multi-Touch
In the modern digital age, consumers are no longer passive recipients of marketing messages. They research products on their phones, follow brands on social media, read reviews, click through emails, and engage with influencer content—all before making a purchase, which may occur on any device at any time. This makes it incredibly difficult to determine exactly how much a specific action contributed to a sale.
Take a customer’s journey for example: they might see a Facebook ad, visit your website, sign up for your newsletter, and later click on a Google search ad before finally making a purchase. The sales cycle is longer, the path to purchase is more convoluted, and the impact of individual touchpoints is harder to isolate. ROI calculations that only look at direct conversions, without considering the influence of all these channels, may fail to capture the true value of marketing efforts.
The Fantasy of Last-Click Attribution
One of the most common mistakes when calculating ROI in the digital world is relying on last-click attribution. This is the practice of giving full credit for a sale to the last interaction a customer had with your brand before making a purchase, such as a Google search ad click or an email open.
While last-click attribution can help measure direct response, it oversimplifies the customer journey and ignores the earlier touchpoints that may have had a significant influence on the decision to buy. Brand awareness campaigns, social media engagement, and content marketing, for instance, often play a critical role in guiding a customer towards conversion—but they may not be captured by last-click attribution.
For example, a customer who initially saw your brand via a Facebook ad, then read a blog post, and later clicked on a Google ad, will be attributed solely to the Google ad—even though the earlier touchpoints contributed to their decision to convert. This can drastically distort your ROI calculations and lead to poor marketing decisions.
ROI vs. ROAS (Return on Ad Spend): The Pitfalls
Another common metric in the digital marketing world is ROAS (Return on Ad Spend), which measures the revenue generated directly from a particular advertising campaign. While ROAS is useful for assessing the short-term effectiveness of paid media, it doesn’t always reflect the full scope of value generated by an advertising campaign.
Let’s say you run a paid social media campaign with a high ROAS, but you’re only tracking direct sales attributed to the ad. What you may not be factoring in is the long-term impact of brand awareness or the halo effect the ad has on future purchases from customers who saw the ad but didn’t convert immediately.
For example, a customer might see your ad, but instead of buying right away, they might sign up for your email list, engage with your content on social media, or even just remember your brand. When they make a purchase later, perhaps via a different channel, traditional ROI models might fail to account for the role the ad played earlier in that journey. As a result, ROAS can undervalue the true contribution of ads to long-term revenue.
The Changing Nature of Marketing: Beyond Sales to Engagement
In today’s world, marketing is no longer just about making sales in the immediate term. Many digital marketing campaigns focus on creating engagement, fostering relationships, and building brand loyalty. This might involve efforts like content marketing, influencer partnerships, social media engagement, or community-building activities.
Measuring ROI purely through direct sales makes it difficult to evaluate the success of these long-term strategies. For example, brand building through consistent social media content or influencer partnerships may not yield immediate sales, but it is likely to create awareness and trust that pays off in the future. This long-term brand equity isn’t easily captured in traditional ROI metrics but can be incredibly valuable to a business over time.
Rethinking ROI: A More Holistic Approach
So, if ROI no longer captures the full picture, what should marketers focus on to measure success? Here are a few alternatives to traditional ROI that provide a more nuanced view of performance:
1. Customer Lifetime Value (CLV)
Rather than looking only at immediate returns, focusing on Customer Lifetime Value (CLV) offers a broader perspective on marketing effectiveness. CLV estimates the total revenue a customer will generate over the entire course of their relationship with your brand. This allows marketers to consider long-term customer engagement, retention, and the cumulative effect of repeated purchases—factors that can’t be captured by short-term ROI calculations.
2. Multi-Touch Attribution Models
To get a more accurate view of how various touchpoints contribute to a sale, marketers are increasingly turning to multi-touch attribution. This method assigns credit across the entire customer journey, rather than just the last click. Multi-touch attribution models can help determine how each channel—whether it’s paid search, email marketing, or organic social—contributes to conversions and overall sales.
By using these models, marketers can more accurately gauge the impact of brand-building efforts and make better decisions about where to allocate resources.
3. Engagement Metrics
In addition to focusing on revenue, it’s important to consider engagement metrics like website traffic, social media interactions, and email opens as indicators of success. While engagement may not immediately result in a sale, it shows how customers are interacting with your brand and can serve as an early signal of future conversions. These metrics can provide context for understanding the customer journey and help refine future marketing strategies.
4. Brand Health Metrics
Finally, metrics that measure brand health—such as brand awareness, customer satisfaction, and Net Promoter Score (NPS)—can provide valuable insight into the effectiveness of long-term marketing efforts. These metrics capture the intangible aspects of loyalty, trust, and emotional connection that go beyond immediate revenue.
Conclusion: ROI Is Evolving, Not Irrelevant
While Return on Investment is still an important measure, it’s no longer the be-all and end-all of digital marketing performance. The complexity of today’s digital ecosystem, where customers engage with brands across multiple touchpoints and devices, requires a more sophisticated approach to measurement. Relying solely on ROI can lead to an incomplete or misleading picture, especially when marketers focus only on short-term, direct sales without considering the long-term impact of their efforts.
Marketers need to embrace more holistic metrics, such as Customer Lifetime Value, multi-touch attribution, and brand health indicators, to assess the true impact of their strategies. By doing so, businesses can move beyond the fantasy of ROI as the sole measure of success and gain a deeper, more accurate understanding of their marketing performance.
