How to Calculate Your Marketing ROI
The discussion of return on marketing investment and how to measure has been around since companies first started investing good money into building awareness and image through marketing efforts. This has generated much debate as there is no consensus on how to calculate return on marketing dollars. Far from the debate, the advent of digital marketing has further convoluted the discussion as the sheer volume of data that is now available has made it even harder to pick out what is relevant. While there may be different ways of calculating marketing ROI, the most important thing to remember is to pick metrics which are relevant to your business first and then track the effect from marketing on these key performance indicators. All too often, companies fall into the trap of marketers who fit results to their purpose, picking and choosing numbers after the fact which seem to support their case. With the right guidance, however, its possible to achieve impressive multiples on relatively low marketing investments.
Ultimately, the goal of marketing can be broken down into two broad categories, increasing awareness of your business and boosting sales. As these are two different objectives altogether, the way return is calculated for each goal will be different and the information which is relevant will differ. Calculating ROI for the former is actually rather straightforward for digital channels. Analytic software allows you to track exactly how many people are seeing your content, how many people are visiting your site and so on. These numbers can be transformed into metrics that have value for companies by measuring things such as Cost per Thousand Impressions, Click Through Rates, Cost per Click and many others. Some companies go so far as to assign a monetary value to certain prospects based on the expected future income generated by new customers.
Measuring the effect of marketing efforts on sales can be a little more complex, but not impossible. With a well-executed marketing strategy, clear trends in sales patterns can be seen and tied back to marketing dollars. Some best practices apply. Campaigns should be targeted and well documented so that a relation can be drawn between when ads were being run and when sales increased. Taking the time beforehand to identify areas with high potential to gain from marketing efforts and establishing how performance will be measured is the key to maximizing your marketing dollars and breaking out of the “marketing as an expense” mindset. It will also give you the tools you need to figure out what works and what doesn’t so you can focus on the best investments for your business. Once you are actually measuring your ROI, the results may surprise you.
Take the case of one credit union client who was not tracking their marketing investments before initial contact. After going over what their goals and pain points were, we were able to draft up a strategy that focused their marketing dollars where it really mattered to them and collect an enormous amount of data about the reach of our efforts. The results? That first year they saw a 60% increase in auto loans and a 50% increase in credit cards. Overall, the strategy employed was able to achieve a 180% ROI for the first year. These results and our ability to measure them were a result of clear communication and goal setting early on in the process. If you are ready to get serious about tracking your marketing investments and driving growth through effective digital strategy, it is time to contact Strategis and see how we can help you.
