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Written by: Leonard Parker | Climate Tech | March 26, 2024
The climate tech industry is new, booming, and dynamic in 2024. Amidst this burgeoning landscape, the role of digital advertising in driving environmental advocacy has never been more crucial. However, accurately measuring the return on investment (ROI) of such campaigns remains a challenge.
Read on as we delve deep into the intricacies and significance of ROI analysis in digital advertising, elaborating on its pivotal role in facilitating informed, data-driven marketing decisions for climate tech enterprises.
Given the climate tech industry’s relatively new nature, surging need, and rising popularity, the environment is ripe to attract investors and partners. One of the keys to doing so is showing concrete ROI figures—your ROI figures demonstrate the financial viability of your sustainability initiatives and clearly differentiate your company from its competitors.
Beyond external interest, ROI analysis also enables companies to quantify their efforts toward a project and its financial return. This paints a clear picture that’s crucial for intelligent use of resources and informed decision-making about scaling successful projects, pivoting from unsuccessful ones, or adjusting strategies to enhance overall effectiveness.
In essence, ROI analysis enables you to work toward your long-term financial sustainability. This involves managing costs effectively, optimizing revenue streams, and adapting strategies to evolving market conditions.
In theory, the concept of ROI is rather simple: You measure the percentage returns you get per your investment. Mathematically, it is:
Profit ÷ Cost
For example, if your Meta campaign generates $2,000 in net profit and costs $1,000, its ROI would be 2:1 or 200%. This calculation is paramount in identifying the advertising channel that yields higher returns for the lowest cost, allowing your firm to utilize your resources efficiently.
Given today’s multi-channel digital marketing campaigns, a user’s journey from the first click to the last will encompass multiple touchpoints, such as an Instagram video, a Google ad, and a blog post, to finally complete that purchase. So, if you get a sale, how do you know what percentage of profit to attribute to a particular campaign? This is where attribution models come in.
Let’s discuss a few ROI attribution models relevant to the climate tech industry:
First-touch attribution gives all credit to a user's first touchpoint with a digital advertising campaign. For climate tech brands, this initial touchpoint is often critical in raising awareness and sparking interest in sustainability initiatives (for example, an educational blog post or social media content highlighting the importance of renewable energy solutions).
Conversely, in last-touch attribution, all credit is assigned to the last touchpoint, attributing the conversion to the final pre-purchase interaction with the business—say, a discount coupon sent via email.
Although the long-term value of brand awareness or the importance of the last conversion-driving factor can not be understated, sustainability initiatives have an audience of individuals who prioritize mindful consumption, resulting in longer decision-making processes. This means that single-click models may not work the best in the climate tech industry unless your product is priced very low and you expect to attribute a part of your sales to impulse purchases.
If you believe you have designed a customer journey where the first and last touchpoints matter the most, you can also opt for the U-shaped model. This assigns a higher weight to both the first and last touchpoints, with a moderate weight for intermediate interactions. Here, you’re recognizing the role of early education and engagement in priming users for later conversions while also acknowledging the impact of final actions that drive results.
In the linear attribution model, you distribute credit equally across all touchpoints in the customer journey, recognizing the importance of each interaction regardless of its position in the funnel. As your focus as a climate tech brand may be on building long-term relationships and raising awareness about environmental issues, you will acknowledge the collective effort of various digital channels in nurturing leads and driving conversions by adopting the linear model.
However, linear modeling can undervalue those touchpoints that had a larger part to play in the customer’s conversion journey, leading to imprecise calculations.
The time decay model argues that touchpoints closer to the conversion event have a more significant part to play in the customer’s journey, so it assigns more credit to them. For instance, the Facebook video that introduced the customer to your brand may not be as crucial as the webinar they watched that led them to trust your brand and make that purchase.
The main challenge in measuring ROI in digital advertising is more or less the multi-touchpoint, cross-platform journey that customers take. It can cause the following ROI calculation issues:
On average, it takes eight touchpoints to drive conversions, and each of these often occurs across multiple channels, like digital advertising, educational content, social media, and platforms that do not cross-share data, say Google and Meta. This can make it incredibly challenging to attribute the right proportion of gains to the right channel, leading to you undervaluing or overvaluing your returns.
Given the unique audiences, climate tech initiatives must involve the right educational resources, like whitepapers, educational videos, books, and seminars. These touchpoints are essential in fostering brand loyalty, brand awareness, trust building, and nurturing leads over time; not attributing them to sufficient credit in ROI calculations may lead you to underestimate the overall value generated by marketing efforts.
Sustainability initiatives often involve longer sales cycles and delayed impact compared to traditional consumer products or services due to the thorough consideration and planning involved on the audience’s part. Consequently, the results of marketing efforts may not manifest immediately, making it challenging to attribute conversions accurately to specific campaigns or touchpoints.
Your ROI analysis must account for the extended time frame and consider the cumulative effect of marketing activities on eventual conversions. This becomes more crucial when dealing with products that require significant investment on the consumers’ end.
Data fragmentation and lack of integration pose obstacles in conducting a comprehensive ROI analysis. As most social media platforms and search engines aren’t owned by a single entity, you may be getting inflated ROI results by blindly trusting conversion metrics.
For instance, consider a customer who clicks on your Facebook page, lands on your website, and bounces off without making a purchase. Say, within 30 days, the customer comes across your Google ad, clicks it, and finally completes the purchase. Both Google and Facebook will report the conversion as theirs, leading to you double-counting the sale.
Designing multiple campaigns on each platform per audience demographics, psychographic, and behavioral characteristics will enable you to mitigate the budget loss associated with incorrectly targeting all-in-one campaigns. Work on developing customer personas and designing multi-touchpoint journeys per user.
In general, content marketing has a three times higher ROI than pay per click while costing 30%–40% less. This is even more pronounced in climate tech and sustainability niches, in which audiences are consuming mindfully and conducting thorough research. Invest in whitepapers, webinars, long-form content, videos, and infographics to establish your company’s credibility and build audience trust.
Invest in creating compelling ads that grab attention, evoke emotions, and communicate your value proposition clearly and concisely. Test different ad formats, visuals, headlines, and messaging to identify what resonates best with your audience, and utilize A/B testing to optimize for higher clickthrough and conversion rates.
You must use data as a lens to gain insights into your prospects’ needs and expectations and refine your campaigns with time. Using the right tools and metrics is crucial here to filter the most essential data. Avoid vanity metrics like follower count, and focus on actionable ones like user acquisition cost, lifetime value, and conversion rate.
The right tools and technologies can assist you in precise ROI calculation, real-time tracking, and comparing campaign and channel performances.
Here are some of the most commonly used solutions available in the market:
When deciding on a tool, look for features like customizable calculation templates, multi-integration facilities, thorough reporting, and ease of collaboration.
ROI analysis is crucial to a company’s optimal resource usage. Beyond increasing profit margins and attracting investors, it ensures your efforts are justified and your role in sustainability is impactful.
You must ensure you’re using an attribution model that is right for your business and valuing all touchpoints appropriately. However, given multi-channel campaigns and longer sales cycles associated with climate tech brands, we understand ROI analysis can be tricky. It’s best to book consultation sessions with professionals so you can proceed in an informed manner. Climate tech audiences are also nuanced and require a niche-specific approach.
Rather than hiring or training an in-house team, you can outsource to us here at Destiny Marketing Solutions. We offer comprehensive digital advertising and analytics services specifically for sustainability and climate tech brands so they can grow and scale strategically and successfully.
Generally, ROI benchmarks vary per industry, but the minimum acceptable ROI is a 200% return on your Google ad spend. Aim for 400% or more to retain high profit margins and cater to overheads.
As digital ads have a broader and more targeted reach than conventional mediums, they yield higher returns. An ROI of 5:1 or 500% is typically considered good in the realm of digital advertisements.
Search engine optimization, pay per click, and email marketing yield the highest returns on investment, although this may vary per industry.
The profitability of your digital advertising campaigns is hugely dependent on your marketing team’s skillset. With cohesive branding, multi-channel strategies, detailed audience segmentation, and targeting, you may be able to achieve ROIs as exceptional as 10:1.
Magna, Dentsu, and GroupM point to a 5.7% increase, on average, in advertising spending in 2024. The calculations consider media price inflation, economic condition forecasts, and general market behavior predictions.
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