A new analysis of WARC’s database sheds light on the changing benchmarks in returns on investment (ROI) in marketing, showing what marketers should expect from successful advertising campaigns.
Over 1100 WARC case studies since the year 2000 which contained ROI (profit or revenue) data were included in the analysis, summarised in the ROI Benchmark Report. The report also includes analysis by budget band and product category.
A quick recap: ROI is a popular, though not infallible, way of measuring marketing efficiency. There are two forms: revenue ROI, which is the ratio of incremental sales to campaign investment. Profit ROI is the more useful measure, also known as return on marketing investment (ROMI) or payback, as it allows you to compare the efficiency of different campaigns.
Due to its relative simplicity, marketing has misused ROI, by believing it to be a measure of effectiveness rather than a measure of efficiency. The easiest way to improve an ROI figure is to reduce investment, but this is not a route towards increasing profit.
Net profit generated is a measure of marketing effectiveness and is the ultimate KPI for marketing personnel. ROMI is a measure of marketing efficiency.
Median profit and revenue ROI
Across the WARC database, the median profit ROI is 2.17:1, which means that each dollar invested has brought in an additional $2.17 of net profit having excluded the cost of the campaign in the calculation. Median revenue ROI among successful advertisers, meanwhile is 4:1.
There are a couple of important caveats. First, most campaigns submitted contain only the short term results. Second, WARC’s ratio tends to be a little higher than other average estimates, given the high proportion of award-based entries.
Evidence in the WARC database strongly suggests that the long-term impact of advertising is approximately twice the short-term impact, so the 2.17:1 median profit ROI in the database could be significantly higher over a longer timeframe.
Read more in the Advertising Research Foundation paper Why aren’t you looking at the Long Term ROI of ads?
Sourced from WARC