Measuring ROI in Industrial Marketing

UK manufacturers have ambitious targets for growth over the next few years, with 52% aiming for at least 20% in the next five years (Make UK); however, the effects of the cost-of-living crisis, the repercussions of Brexit, the ongoing process of COVID-19 recovery, and the relentless rise of global competition have created a challenging landscape to achieve such goals. In fact, the profitability of UK manufacturers has been steadily falling since 2016, and the current net rate of return is only just above pre-pandemic levels (ONS). 

All things considered, the role of ROI assessment has never been more critical for manufacturers, but with over half of industrial marketers admitting they don’t know whether their efforts are yielding a positive return on investment, it’s clear that there is an industry-wide problem with quantifying ROI. This is despite recent studies showing that UK manufacturers can improve their profitability by up to 5% simply by effectively assessing ROI (UK Manufacturing Barometer).

In this guide, we’re going to dive deep into the world of ROI for industrial marketers, breaking down the jargon and intricacies surrounding ROI, and offering practical insights and strategies for manufacturers looking to grow rapidly in an extremely challenging business landscape.

Understanding ROI in Industrial Marketing

Knowing the numbers matters, especially at a time when growth is fundamental to success and the future of the UK manufacturing industry as a whole. 

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The cost-of-living crisis has left both consumers and businesses grappling with increased expenses, putting pressure on profit margins and the ability to invest in growth initiatives. Brexit has introduced a new layer of complexity to supply chains and trade relationships, necessitating adaptability and strategic decision-making. Businesses are still navigating through the Covid aftermath of disruptions to supply chains, labour markets, and consumer behaviour, and the relentless expansion of global competition means that manufacturers are facing intensified pressures to innovate, optimise, and deliver superior value in reduced timeframes.

With four seismic challenges running concurrently, every pound spent by manufacturers must count. There is little room for failed campaigns, and the industry knows it, but there remains the issue of being able to accurately calculate ROI from a marketing perspective. 

Why Measuring ROI Can Be Challenging

The premise behind calculating ROI is simple: what you get (the return) divided by what you put in (the investment). If the result is more than 1, you're making more than you're spending. It seems easy, but in manufacturing, there are several hurdles that make this simple sum a lot more complicated. 

1. Long Sales Cycles: Manufacturers often have lengthy sales cycles. A study by CSO Insights found that 27% of sales cycles in the UK last for over seven months. This can make it somewhat hard to track the impact of marketing efforts on eventual sales.
2. Multiple Touchpoints: Customers interact with your brand through various channels – online, in-person, and through intermediaries. Measuring how each touchpoint contributes to ROI is a puzzle in itself.
3. Attribution Models: Figuring out which marketing effort directly led to a sale can be like finding a needle in a haystack. Many marketing campaigns work in synergy, such as email campaigns running alongside paid social media, and this can make it difficult to assign value accurately.

Add to this the fact that data may be stored on several channels and managed by multiple team members, it’s clear to see how measuring ROI for both individual and collective campaigns can become a challenge. 

Components of ROI

There are five main components of ROI for industrial marketers to consider:

1. Revenue Generation: At the heart of ROI is revenue. It's about how much money your investments bring in. For UK manufacturers, understanding where your revenue comes from and which products or services are most profitable is vital.
2. Cost Analysis: To calculate ROI, you need to consider costs. This includes the cost of raw materials (e.g., ad spend or event costs), labour (the pay of the person/people involved), and any other overheads. By analysing costs, you can identify areas where savings can be made.
3. Time and Resource Allocation: Time is money, and efficient resource allocation is key. Consider how long it takes for an investment to pay off, but also how long it takes to produce, how many people are needed, and whether their time could be better spent elsewhere. 
4. Attribution Models: Attribution models help you understand which marketing or sales activities lead to conversions. This is essential for UK manufacturers aiming to optimise their marketing spend.
5. UK Manufacturing Landscape: ROI can be heavily influenced by external industry factors, and as mentioned, the UK manufacturing industry has had to overcome unique challenges such as Brexit and the cost of living crisis, both of which will have an impact on revenue and spend. 

Common ROI Jargon 

There are lots of acronyms associated with ROI which can make calculating and understanding it hard, the main of which include:

• LTV (Customer Lifetime Value): How much a customer is worth to you over time. It's crucial because loyal customers can bring in more profit.
• CAC (Customer Acquisition Cost): The money spent on getting new customers, including marketing and sales costs.
• CAC Payback Period: This shows how long it takes to earn back what you spent on getting a customer. A shorter period is usually better.
• CAC Ratio: It's about comparing how much you spend on getting customers with the money they bring in. A ratio below 1 means profit.
• CAC Efficiency: Measures how well you're using your money to get customers. Higher efficiency means better ROI.
• CAC/LTV Ratio: Puts CAC in perspective by comparing it to LTV. If CAC is a lot less than LTV, it's a good sign.
• CPA (Cost Per Acquisition): The cost of getting one customer through a specific marketing channel. Keep it low to save money.

Setting Up ROI Measurement

Measuring ROI is like putting on the right pair of glasses – it helps you see clearly and make smart decisions. In the UK, where the business landscape is both dynamic and competitive, getting your ROI measurement game strong is crucial, and it’s not as complicated as it might seem.

Step 1: Set Clear Goals and Objectives

Start by setting clear goals. What do you want to achieve? Whether it's increasing sales, reducing costs, or expanding market share, having specific objectives helps you stay on track. According to a survey by Smart Insights, 52% of UK businesses with clear marketing goals achieve better ROI.

Step 2: Define Key Performance Indicators (KPIs)

KPIs are like your dashboard indicators – they tell you if you're on the right track. Identify the metrics that matter most, like website traffic, conversion rates, or customer retention. 

Step 3: Implement Tracking and Analytics Tools

Use tools to monitor your digital presence. Tracking data helps you understand customer behaviour and optimise your marketing efforts. Most apps and service providers will have built-in analytics, so make sure you familiarise yourself with them. 

Step 4: Data Collection and Integration

Collect data from various sources, such as your website, social media, email campaigns, and sales records. Integrating this data helps create a complete picture of your ROI.

Step 5: Attribution Models

In the UK, 44% of marketers prefer multi-touch attribution models to understand the customer journey. These models help you see which marketing efforts contribute most to your ROI.

Calculating and Interpreting ROI

Calculating and understanding ROI is a crucial task for UK industrial marketers, but as mentioned, is something over half of industry professionals struggle with. Put simply, ROI (%) = (gains - costs) / costs x 100

• Gains: These are the additional profits or revenue generated from your marketing efforts. Track how much more you're making because of your campaigns through MoM or YoY comparisons.
• Costs: Include all your marketing expenses - from advertising and content creation to staff wages and software tools.

ROI (%): Multiply the result by 100 to get the percentage ROI.

For example, if you spent £1,000 on a campaign and it brought in £3,000 in extra revenue, your ROI would be: ROI (%) = (£3,000 - £1,000) / £1,000 x 100 = 200%

That means for every £1 spent, you earned £2 extra, which is a decent ROI.

Strategies for Improving ROI

Improving ROI is at the heart of business and sector growth, and there are several ways you can achieve this:

• Refining Targeting: Precision matters. Use data to target the right customers at the right time, reducing wasted efforts. A study by Statista found that targeted emails can increase revenue by up to 760%.
• A/B Testing: Test different approaches to see what works best. According to the Content Marketing Institute, 96% of successful marketers use A/B testing to optimise their campaigns. You won’t always get it right first time, and that’s okay, as long as you can identify why something didn’t work and change it for next time.
• New Strategy Adoption: Don’t be afraid to invest in new sales and marketing tools. If your current content isn’t yielding the ROI you want, try presenting your content in a different way, such as with 3D interactive product guides. 
• Content Marketing: Share industry insights and build trust. The UK Content Marketing Institute found that 63% of UK marketers consider content marketing to be the most effective SEO strategy.
• Marketing Automation: Streamline repetitive tasks and engage customers. The Aberdeen Group found that companies using marketing automation typically see a 53% higher conversion rate.
• Sales and Marketing Alignment: Collaboration boosts ROI. Research by Forrester found that B2B organisations with strong sales and marketing alignment achieve 24% faster revenue growth.

Overcoming Common ROI Measurement Pitfalls

Measuring ROI isn't without its hurdles, but overcoming these pitfalls is crucial for accurate reporting and streamlining strategies.

1. Data Overload: With the rise of digital marketing, data can be overwhelming. To tackle this, focus on relevant metrics, like conversion rates, and use tools like Google Analytics for clarity.
2. Poor Attribution: Many businesses struggle to attribute sales accurately to specific marketing efforts. Employ multi-touch attribution models and track customer journeys to gain a clearer picture.
3. Short-Term Focus: Over 60% of UK businesses prioritise short-term ROI, often at the expense of long-term growth. Strike a balance by considering Customer Lifetime Value (CLTV) and making decisions that benefit your future.
4. Neglecting Customer Retention: Acquiring new customers can cost five times more than retaining existing ones. Invest in customer retention strategies to maximise ROI.
5. Lack of Testing: A/B testing can boost ROI by 10-20%. Experiment with different strategies to find what works best for your audience.

6 . Failure to Adapt: Industries evolve, and adapting to changing consumer preferences and market trends is key for sustained ROI growth, but this is something manufacturers struggle with. The UK is the slowest country in the industrial G7 to adopt new tech (IFR). If you’re a manufacturer looking to grow, this could be the most vital change you make. 

Remember, ROI measurement isn't a one-size-fits-all solution. Tailor your approach to your business and audience specifically.

Conclusion

When you invest, you want to know it's worth it. ROI guides decisions, making sure you don't waste a penny. It connects strategy to results and is a key indicator of business health and stability. By understanding ROI and all the facets that go into it, you can begin to streamline your strategies and take steps to gain tangible results that contribute towards your growth goals. 

To find out more about ROI-boosting 3D product marketing and sales solutions, contact us.