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How to Fix 7 Pitfalls When Calculating Return on Ad Spend

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calculating return on ad spend

Understanding return on marketing investments is more critical than ever. We’ve exited a reasonably long stretch of economic stability, and business leaders are adjusting accordingly by asking more detailed questions of marketing—particularly around digital ad spend.

It turns out these are smart questions to ask! According to a January 2021 Forbes article, P&G turned off $200 million of digital marketing, Chase reduced website ad coverage by 99%, and Uber shut down $120 million of digital marketing. None of them saw a decline in sales.

If you Google “return on ad spend,” you’ll get a lot of unhelpful advice about how simple it is to calculate. Their equation will look something like this:

B2C ROAS Calculation

That calculation works if your customer is buying a pair of socks or a book. If your product costs enough to warrant a purchasing committee, the odds that someone sees one advertisement and immediately wants to sign a contract are extremely low. Field marketers, email marketers, content marketers, and salespeople will be unhappy with that simple equation because they (justifiably) want their efforts to count, too.

Let’s dig into common reasons why marketers stumble when calculating return on ad spend (ROAS).

Your Reports Don’t Match

As a marketer, we want our data captured in our marketing automation platform. This means, at the very least, actions get associated with an identifiable human in our database. Unfortunately, there are a lot of reasons this may not play out as we hoped:

  • Disabled cookies
  • Browser setting blocking Google Analytics
  • Lack of UTM tracking
  • Lack of call tracking
  • Lack of pixel tracking

Each of these examples would result in anonymous web traffic (in the case of disabled cookies or browser settings blocking Google Analytics) or a potential misattribution to a different lead source. No matter how well you train people on the other end of a generic 800 number displayed on an ad, you’ll have leads slip in that are attributed to “inbound call” rather than the specific SEM campaign that drove them to make the call.

A lot of marketers settle for “directionally accurate” reporting or estimating the lift an advertisement provided on chatbot demo requests or form fills. Unfortunately, executives don’t typically buy into directionally accurate reporting when a lot of money is funneling into the tactic.

To make matters worse, there are legitimate reasons why Google Analytics won’t always align with Google Ad data. These reasons include:

Why google ads doesn't match google analytics

Why It Matters

Paid search requires a healthy budget to work well. Small to mid-sized companies typically spend around $10,000 per month. This allows them to try several keywords, analyze early indicators, and funnel budget into the most effective tactics. The spend accounts for a big chunk of the marketing budget for a small company, which means team members will be frustrated if they feel you’re wasting money they could be spending elsewhere.

In other words: Do everything possible to track conversions!

If you’re trying to make the argument that paid search is having an impact on website visits and form fills indirectly (people like to search for the company instead of click on ads), you better be prepared to speak intelligently to the reports you’re using to support your argument. If you aren’t aware of reporting discrepancies in Google platforms, execs won’t buy that your reports are even “directionally accurate.” You’re supposed to be the expert, and you lose credibility when you can’t explain reporting discrepancies.

The Fix

There isn’t much you can do if a prospect is savvy enough to block Google Analytics tracking. You will always have a percentage of anonymous web traffic, but we’ll cover UTM tracking, call tracking, and web tracking in a moment.

Hire a professional to fix your Google reports or learn each of the settings and how they impact your reporting output in each platform. Then research how the systems count “conversions,” “sessions,” and other key metrics so you can defend your reports.

Check out this article on MediaPost and searchengineland.com as starting points.

Where Did That Form Fill Come From?

Google does a pretty good job of tracking where someone came from upon entry. Once that person starts clicking around your website, you can lose visibility into how they arrived on your page before requesting a demo.

Why It Matters

UTM Tracking is a great way to correct some of Google Analytics’ shortcomings.

UTM parameters aren’t just for paid search or paid social ads. They’re also great for tracking whether an email drives traffic to specific content or if your G2 profile leads people to your website to request a demo.

The Fix

Make sure your team knows about your department’s UTM guidelines. Define your sources and mediums, and determine whether you include your ad ID in your campaign name. We recommend you do if you plan to integrate your digital advertising platforms to get a more accurate return on ad spend reporting.

While UTM parameters are essential for tracking paid search, retargeting, and paid social contribution to revenue, UTM parameters can create a huge mess if done incorrectly. Google Analytics considers text case when creating segments. This means if you use Social Media and social media, these numbers will be split, making it very easy to cause discrepancies between your marketing analytics platform and Google Analytics.

Using internal UTM tracking codes to track when someone clicks from one page to another also creates issues rather than solving any. An internal UTM link reference will wipe out your original data sources, and you’ll lose insight into how someone found your website in the first place.

Check out this article from SpyFu for more best practices. Although many companies suggest using URL shorteners, I’ve personally found that people are more likely to click a long link if they can tell where it’s originating from. It’s worth A/B testing.

Some People Still Use Telephones

I’m the kind of person who prefers to argue online with a technical support representative for thirty minutes rather than make a five-minute phone call to resolve an issue. It’s ridiculous. I know calling is more efficient. And yet, as an introvert, actually talking to someone is not appealing.

There are many people out there who don’t share my view of the world. They’ve learned from their frustrating online experiences. This means you need a method of tracking people who find your number through an advertisement.

Why It Matters

People who are invested enough to make a phone call are displaying higher intent than someone who wants only to engage online.

The Fix

People willing to pick up a phone and find out more about your product are more likely to convert, so make sure you have a unique phone number that can be tied back to your campaign. Also, train your inbound team to allocate leads to the appropriate campaign and have a regular cadence to review these calls so that you can ensure the leads are correctly attributed.

We Don’t Think Retargeting or Social Ads Work

While there is some inherent tracking available from social media on Google Analytics, that information doesn’t always transfer to your marketing automation platform. It also won’t specify that the click was from an advertisement on social media unless you use proper UTM parameters and pixel tracking.

Why It Matters

Pixel tracking is essential if you want your retargeting ads to fire correctly or social media to record specific actions as conversions. For example, if a target visits CaliberMind, we use pixel tracking to serve up ads on CNN or Forbes.

how does retargeting work

You can also apply pixel tracking to a form’s button to force a conversion to happen when someone submits the form (although this will assume the form submit is always a success). You can even apply pixel tracking to a thank you page after the form fill is complete. This makes your conversion tracking on social media or retargeting fit your definition of a conversion rather than just a click on an ad.

The Fix

We recommend diving into the help documentation offered by your social media advertising platforms or retargeting tool for more details on how to best use their pixel tracking capabilities. Some platforms, like LinkedIn, offer to connect you with an expert to talk you through the basics or connect you with a technical pro.

We Didn’t Watch Leading Indicators

As marketers, we know it takes time for people to move down the funnel after first engaging with paid search or paid social. However, many leading indicators can help us determine whether or not the ad is resonating with the right audience.

Why It Matters

If a small company is spending $10,000 a month (a large chunk of their marketing budget), they shouldn’t assume it takes six months to figure out if their campaigns are working. Minimize your losses and maximize your gains by looking at whether the right people engage with your content and your conversion costs are near the industry benchmark.

Some keywords span both B2B and B2C markets. Finding out that the term “broadband” brought in a horde of consumers looking for cheap internet rather than your niche market two months into an advertisement is a costly lesson.

The Fix

We’ve given a real-world example of how we used analytics and leading indicators to optimize some of our own advertising. For more details about which metrics to watch and why they matter, check it out.

Our Visitors Are Anonymous

Companies relying on IP addresses to calculate the company associated with the visiter had a rude awakening in April of 2020. When people began working from home en masse, those designated IP ranges were useless.

Why It Matters

The earlier you can identify that an account is engaging with your content, the sooner you can determine whether an account should be passed to sales.

The Fix

Installing web tracking like Analytics.JS can help you retroactively identify people once they fill out a form. This allows you to retroactively identify historical interactions and give sales a better picture of what their prospect was engaging with before the opportunity is created.

While we can’t always show touches that are anonymous as part of ROAS, there is an ability to incorporate some of this data at the account level and incorporate it into scoring. This is another example of how having both engagement AND Attribution (or ROAS) in the same platform is so important to gauge how marketing is doing. You can read more of my thoughts on this topic here.

We Only Look at One Campaign Activity

Marketers who use first-touch single-point attribution will be accustomed to seeing a lot of value placed on early engagement activities like paid search. Those who use last-touch single-point attribution will have to explain to management why their chatbot isn’t the only marketing tactic they should invest in. Neither of these views gives a holistic view of marketing efforts needed to generate a sale.

Why It Matters

Attribution is an absolute must-have if digital marketers want to prove their value to the business. We know the executive team wants detailed reports on how each investment produces value, and multi-touch attribution is the best way to determine what’s working and what isn’t when it comes to revenue generation.

It’s important to think of your ad campaigns in the context of your complete marketing story. Likely, this touch is one of many at a given company. Salesforce campaign influence reporting, for example, gives full credit to any campaign that touches an account that has an opportunity IF the contact is associated as a “contact role” on the opportunity. This doesn’t sit well with because:

  • It doesn’t consider the entire buyer journey across the account, incorporating contacts and leads that aren’t called out by the sales team but have interacted with your company
  • It double (triple or quadruple or...) counts revenue instead of looking at the touch as a fraction of the total effort
  • It lists your total ad spend on each campaign touch instead of considering all of the activity across all accounts that was generated, the revenue those touches generated, and then calculating ROAS
don't look at one campaign

Thinking of ROAS in the context of multi-touch attribution can give you a more realistic "value" picture.

The Fix

Multi-touch attribution only works if you have the data infrastructure necessary to clean your underlying data. If you bolt an attribution tool onto your CRM or MAP, your output will only be as good as the data you’re plugging into. For more information on must-have features for any attribution tool, check out our article.

Once you’ve selected your multi-touch attribution model and gotten buy-off from the leadership team (more on that here), your B2B ROAS calculation should be:
b2b return on ad spend calculation

Good luck on your data journey and let us know if we can help!

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