What actually matters when we talk about ROI in marketing

Imagine you’re managing an NBA team and deciding which players to keep for next season based solely on points scored. You’d likely trade away defensive specialists who rarely shoot but shut down opposing stars. You’d overlook playmakers who create scoring opportunities with brilliant passes but don’t take many shots themselves. And you’d miss the impact of screen-setters who free up teammates but don’t appear in traditional stat lines.

Your team would soon collapse because you’ve optimized for a single metric while ignoring the complex system that actually wins games.

This is precisely what happens in marketing departments every day. We obsess over direct conversions and immediate ROI while undervaluing or completely missing the marketing equivalent of assists, defensive stops, and screens—the critical but often invisible activities that make the whole system work. When we talk about ROI in marketing, most conversations revolve around simple calculations. But just as basketball is more than points scored, effective marketing creates value far beyond what’s captured in traditional metrics.

Sophisticated marketers need to uncover the hidden drivers of marketing effectiveness that rarely make it into ROI calculations but often make the difference between campaigns that truly drive business growth and those that merely look good in simplified reports. The goal isn’t to abandon traditional ROI measures but to develop a more comprehensive understanding of marketing’s true impact.

The traditional view of ROI in marketing

Marketing ROI serves as the fundamental metric that helps marketers understand the effectiveness of their marketing efforts. In its simplest form, return on investment (ROI) represents the ratio of profit generated by marketing activities to the costs incurred. The standard marketing ROI formula is calculated by subtracting marketing costs from the revenue generated, then dividing by the marketing costs: 

ROI = (Revenue – Marketing Costs) / Marketing Costs

While this formula appears straightforward, its application across the modern marketing landscape presents numerous challenges. Marketing teams often struggle to correctly attribute revenue to specific campaigns, especially when consumers interact with multiple touchpoints before making a purchase. Some marketing investments are designed to build brand awareness or foster customer loyalty rather than drive immediate sales, making their contribution to revenue difficult to quantify using traditional methods.

Despite these challenges, marketing ROI remains a critical metric for decision-makers when allocating marketing budgets and evaluating campaign performance. Understanding how to accurately measure marketing ROI unlocks data-driven decisions about where to invest marketing dollars for maximum impact. However, focusing solely on immediate return on investment can lead to short-sighted strategies that prioritize quick wins over sustainable growth.

Common ROI-related metrics and their limitations

While basic marketing ROI calculations provide a starting point for evaluating marketing performance, sophisticated marketers rely on a broader set of metrics to gain deeper insights. These metrics help contextualize marketing investments and provide a more nuanced understanding of marketing effectiveness across different channels and campaigns. However, each metric has limitations when viewed in isolation.

Customer Acquisition Cost (CAC) represents the total marketing expenses required to acquire a new customer. This metric helps marketing teams understand the efficiency of their customer acquisition strategies and is particularly valuable for comparing the effectiveness of different marketing channels. While essential for evaluating marketing efficiency, CAC alone doesn’t account for the long-term value that customers bring to the business.

Customer Lifetime Value (CLV) estimates the total revenue a business can expect from a customer throughout their relationship. CLV provides context for CAC by showing how much a customer is worth over time, not just at the initial purchase. The limitation of CLV is that it’s a projection based on assumptions about future behavior, which may not account for changes in customer preferences.

Both Cost Per Acquisition (CPA) and Return On Ad Spend (ROAS) offer more campaign-specific measurements. CPA measures the cost associated with acquiring a specific action, making it useful for optimizing specific stages of the marketing funnel but often failing to distinguish between high-value and low-value actions. ROAS specifically measures the revenue generated for every dollar of ad spend across different marketing channels, but doesn’t account for operational costs and can be inflated by platform-reported metrics that claim more credit for conversions than they deserve.

What’s missing: The hidden value drivers

The traditional metrics discussed above capture only a portion of marketing’s true impact. To understand what actually drives marketing ROI, we need to look beyond immediate conversions and consider the complex ways marketing activities influence consumer behavior and business outcomes. These hidden value drivers often represent the difference between campaigns that appear moderately successful and those that truly power business growth.

Halo effects represent one of the most significant yet frequently overlooked aspects of marketing effectiveness. These are the indirect benefits that marketing campaigns generate beyond their primary objective. For example, your Facebook prospecting campaign doesn’t just drive direct conversions—it also increases organic traffic to your website, boosts branded search volume, and generates more direct visits as consumers become aware of your brand. These secondary effects can often deliver more revenue than the campaign’s direct conversions, yet they’re rarely attributed properly in traditional ROI calculations.

Campaign saturation also escapes conventional analysis. Many marketers assume that marketing campaigns follow a pattern of diminishing returns—as ad spend increases, efficiency steadily declines. In reality, different campaigns saturate differently, and some may have multiple efficiency peaks rather than a single point of diminishing returns. Understanding these unique saturation curves allows marketers to optimize ad spend in ways that generic ROAS targets can’t capture.

The delayed impact of marketing efforts and cross-channel synergies further complicate ROI measurement. Marketing activities create awareness and consideration that may lead to conversions days, weeks, or even months later, while marketing channels work together to guide consumers through the purchase journey. Standard attribution models often use short lookback windows that miss these delayed effects and fail to recognize how channels support each other, potentially undervaluing crucial marketing activities that drive conversions indirectly.

The problems with traditional attribution models

Attribution models attempt to solve the challenge of determining which marketing touchpoints deserve credit for conversions, but they often fall short in capturing marketing’s full impact. Understanding these limitations is essential for developing a more comprehensive approach to measuring marketing ROI. The disconnects between how attribution models assign value and how marketing actually influences consumers can lead to significant misallocations of marketing spend.

Last-click attribution, still widely used despite its limitations, assigns all conversion credit to the final touchpoint before purchase. This model severely undervalues top-of-funnel marketing efforts that build awareness and consideration. Under last-click attribution, a brand awareness campaign on YouTube might show negative ROI despite being instrumental in starting the customer journey that ultimately leads to conversion through other channels. This creates a dangerous incentive for marketers to overinvest in bottom-of-funnel tactics while neglecting the awareness-building activities necessary for sustainable growth.

Multi-touch attribution (MTA) represents an improvement by distributing credit across multiple touchpoints in the customer journey. However, MTA faces significant challenges in today’s privacy-focused environment. With the deprecation of third-party cookies, increased ad blocking, and stricter privacy regulations, MTA models have lost access to crucial data needed for accurate attribution. Even when data is available, MTA still struggles to account for offline influences, word-of-mouth, and the complex ways marketing messages interact in consumers’ minds.

Platform-reported metrics present another attribution challenge. Marketing channels like Facebook, Google, and TikTok each have their own attribution systems that tend to claim more credit than they deserve. When these platforms operate independently, their combined attributed revenue often exceeds the business’s actual total revenue—a mathematical impossibility that highlights the unreliability of platform-specific attribution. This overlap creates confusion about where marketing dollars are actually driving results and makes accurate ROI calculation nearly impossible without a more holistic measurement approach.

A better approach: Holistic ROI measurement

Given the limitations of traditional attribution methods, forward-thinking marketers are adopting more comprehensive approaches to measure marketing ROI. These holistic methods aim to capture the full impact of marketing efforts across channels and over time, providing a more accurate picture of marketing’s contribution to business results. By embracing these advanced measurement approaches, marketers can make more informed decisions about how to allocate marketing budgets and optimize their marketing strategy.

Marketing Mix Modeling (MMM) offers a more complete solution for measuring marketing ROI by analyzing the relationship between marketing activities and business outcomes at an aggregate level. Unlike attribution models that rely on user-level tracking, MMM uses statistical techniques to identify how different marketing variables—along with non-marketing factors like seasonality, pricing, and competitive activity—influence sales performance over time. This approach isn’t affected by cookie limitations or privacy restrictions and can measure the impact of both online and offline marketing channels in a unified framework.

Modern MMM platforms go beyond traditional implementations by providing granular insights at the campaign level rather than just the channel level. These advanced platforms refresh daily instead of monthly or quarterly, allowing marketers to make timely adjustments to their marketing spend. By capturing the full spectrum of marketing effects—including halo effects, saturation dynamics, and delayed impacts—Prescient’s MMM provides a more accurate picture of true marketing ROI than attribution models alone can deliver.

Holistic measurement also involves balancing short and long-term ROI while leveraging predictive analytics for forecasting. A balanced approach considers both immediate performance and long-term impact. It recognizes that some marketing investments may not yield immediate returns but are essential for future success. Meanwhile, Prescient can forecast the likely impact of different spending scenarios, helping marketers optimize budget allocation across channels and campaigns, allowing them to maximize ROI through proactive rather than reactive decision-making.

Practical steps for marketers

Understanding the concept of holistic marketing ROI is one thing; putting it into practice is another. Marketing teams need concrete steps to implement a more comprehensive approach to measuring and optimizing their marketing investments. The following strategies can help marketers overcome the limitations of traditional metrics and develop a more accurate understanding of their marketing performance.

First, prioritize tracking and quantifying halo effects to capture the full impact of your marketing campaigns. This requires looking beyond direct conversions to measure how campaigns influence organic traffic, branded search, direct visits, and even in-store purchases. Implement measurement solutions that can identify these secondary effects and attribute them properly to their originating campaigns. By capturing these halo effects, you’ll often discover that campaigns previously considered marginally effective are actually driving significant value through indirect pathways.

Second, build a compelling case for top-of-funnel investments by demonstrating their role in the overall marketing ecosystem. Use data to show how awareness campaigns feed the pipeline for conversion-focused activities, and how reductions in upper-funnel spending eventually lead to declines in bottom-funnel performance. This narrative approach helps secure budget for critical brand-building activities that might not show immediate returns but are essential for sustainable growth and improving marketing ROI over time.

Third, create a framework for holistic ROI analysis and develop strategies for communicating comprehensive ROI to stakeholders. When presenting to stakeholders, translate complex concepts like halo effects into language that focuses on business outcomes rather than marketing jargon, connecting marketing investments directly to the business objectives that executives care about most. This communication bridge is essential for securing continued support for sophisticated marketing approaches.

Wrapping it up…

The journey toward truly understanding marketing ROI requires moving beyond simplistic metrics to embrace the complex reality of how marketing actually works. Just as a basketball team would fail if it evaluated players solely on points scored, marketing organizations will underperform if they judge campaigns exclusively on direct conversions or immediate returns. The true value of marketing efforts emerges only when we account for the full spectrum of their effects—direct and indirect, immediate and delayed, individual and synergistic.