When you put in the work, you want results. It\u2019s how people are wired.<\/p>\n\n\n\n
How frustrating is it to put in work and see little to no results?!<\/p>\n\n\n\n
If you are one of those people who\u2019ve never had to study, then you may not relate to this. But, if you\u2019re a person who\u2019s ever had to study for a test, you\u2019ll understand.<\/p>\n\n\n\n
When you have a major exam coming up, it requires preparation to do well. Whether it\u2019s to get your CPA, become an electrician, or get a passing grade in math, you need to study. In some cases, studying can take quite a bit of time.<\/p>\n\n\n\n
You may have spent hours or days on end, pouring over the pages of your notes, study guides, and textbooks. Every spare minute you had, you memorized facts, figures, and formulas. You worked really hard to get a high grade.<\/p>\n\n\n\n
The day of the exam arrived and you were so prepared. You were relying on this exam as a stepping stone. You went through each question, feeling pretty confident that you had the correct answers. <\/p>\n\n\n\n
You couldn\u2019t wait to get your test score back. <\/p>\n\n\n\n
And then you got your score. You did not pass with flying colors. Not even close. <\/p>\n\n\n\n
What the heck?!! <\/em><\/p>\n\n\n\n You worked so hard and now you have nothing to show for it. That is not okay. You expected serious results for your time spent. <\/p>\n\n\n\n You wanted a major return on your investment. Who in their right mind would invest in something and not want a good return?! This is especially true when you are running a marketing campaign. <\/p>\n\n\n\n A well-run marketing campaign will always require that its performance is tracked and evaluated. If you\u2019re in marketing, then you know that your marketing efforts are meant to directly affect the company\u2019s bottom line in a positive way. When you track your marketing campaign, you want it to show that all the time, effort, and finances have been worth it. <\/p>\n\n\n\n In a marketing campaign, a return on investment is non-negotiable. <\/p>\n\n\n\n Marketing ROI is pretty simple. In a nutshell, it\u2019s giving credit where credit is due. You have a system in place to measure your marketing efforts, and every vein of the campaign is evaluated. You can justify what you\u2019re spending your marketing budget on when you can show measurable results and how you got them. <\/p>\n\n\n\n It looks like knowing which ads are bringing in new leads and conversions. Once the ROI is calculated, decisions must be made that can have a major impact on your company. So, knowing ways to calculate your return on investment is just smart business.<\/p>\n\n\n\n There are a few things for you to think about first. You want to measure the success of the campaign to get true baselines, assign the marketing budget, justify what you\u2019re spending, and perform a competitive analysis. <\/p>\n\n\n\n This step is a must if you want to create a baseline for measuring future campaigns to compare the two. So, if you haven\u2019t measured ROI correctly in your baseline, all the future measurements will be jacked up! <\/p>\n\n\n\n You have a ton of combinations to choose from for your marketing campaign. But none of those combinations are free. Each separate ad will require funding from your budget. <\/p>\n\n\n\n You must justify what you\u2019re spending your marketing budget on.<\/strong><\/p>\n\n\n\n You have a marketing budget \u2026 and every penny must be justified in order to continue getting funds, and most definitely if you want to get even more funding. You have to prove why you need more money and why it is worth it. <\/p>\n\n\n\n You\u2019ve got to check out what your direct competitors are up to. It will help you to figure out how you stack up to the competition and for you to truly know how you\u2019re competing in your race to stand out in your market.<\/p>\n\n\n\n There are some seemingly simple, basic formulas for calculating ROI.<\/p>\n\n\n\n Here\u2019s one: Marketing ROI = (Value achieved \u2013 investment made) \/ investment made X 100<\/strong><\/p>\n\n\n\n Here\u2019s another one. You just need to subtract the marketing cost from your sales growth and divide it by the marketing cost<\/strong>. <\/p>\n\n\n\n Boom. You have your marketing ROI. Easy peasy, right? <\/p>\n\n\n\n Yeah \u2026 We can\u2019t ignore the fact that this formula is made with the basic assumption that marketing is fully responsible for all of the sales growth. And this means we cannot ignore the unpaid ways that sales come through. <\/p>\n\n\n\n To get the most from your ROI, you need to know exactly how much \u201creturn\u201d your marketing efforts have given you. <\/p>\n\n\n\n And then we have this handy dandy formula: ROI = (Total revenue \u2013 total COGS \u2013 marketing investment) \/ marketing investment) x100<\/strong><\/p>\n\n\n\n What the heck is COGS?<\/em> That\u2019s an easy one. It\u2019s just the \u201ccost of goods sold.\u201d<\/p>\n\n\n\n Now, we need to talk about your gross profit. Knowing your gross profit means that you have a pretty good handle on how much revenue all of your marketing endeavors are bringing you in regard to production costs, shipping, etc. <\/p>\n\n\n\n That being said, we\u2019ve got one more formula for you. The math isn\u2019t complex, people. It\u2019s simply taking your total revenue and subtracting the cost of goods to deliver your product<\/strong>. <\/p>\n\n\n\n Keep in mind that some of what you consider a true return may not be what somebody else considers a return. It truly depends on what you were hoping to achieve or learn through your specific marketing campaign and how you went about running your campaign from start to finish.<\/p>\n\n\n\n So when you\u2019re calculating the ROI of your marketing campaign, you\u2019ll need to consider a couple of things.<\/p>\n\n\n\n Net Profit<\/strong> – If you want to get your hands on your net profit, you\u2019ll need to get a little more into your original ROI calculation. Take your gross profit and subtract any additional expenses, and that gives you your net profit<\/strong>.<\/p>\n\n\n\n Total Campaign Revenue <\/strong>– After you gather all of the numbers to determine your total campaign revenue, you should see a high-level overview of how your efforts paid off. You will more than likely be able to use this number to base future campaign budgets around, plan strategies, or prove the need for more resources. <\/p>\n\n\n\n As you get into the nitty gritty of your true ROI, you want to make sure you\u2019ve turned over every stone, so to speak. In other words, you\u2019ll need to take several costs into account to create an accurate picture of your actual ROI. Be sure to look for these extraneous expenses:<\/p>\n\n\n\n Alright, so there is one more thing that you need to think about when it comes to your ROI. What does the longevity of your customer relationship look like?! In other words, what is the CLV (customer lifetime value)? When you know the CLV, you know more about brand loyalty and each person\u2019s purchasing power or trend. <\/p>\n\n\n\n You\u2019re kind of figuring out the ROI for individual customers! To calculate CLV, you\u2019ll need to use a more complicated formula. Your customer lifetime value is equal to the retention rate divided by the discount rate divided by the retention rate plus one. <\/p>\n\n\n\n That just sounds confusing. It looks like: (Retention Rate) \/ (DiscountRate\/Retention Rate +1)<\/strong><\/p>\n\n\n\n You can expect your ROI to be somewhere around 5 to 1 if it\u2019s decent. When it is fantastic, your ROI will be more like 10 to 1. When you find yourself at two to one, that campaign is not making you any money. So don\u2019t repeat that one!<\/p>\n\n\n\n There is an exception to this rule. When your overhead costs are pretty low, you don\u2019t have to sell as much to get a decent ROI. This is another reason for you to pay attention to all the factors playing a part in each campaign. <\/p>\n\n\n\n Failure to Consider the Long-Term Game<\/strong>. Marketers tend to be short-sighted when it comes to measuring the success of a campaign. It doesn\u2019t account for the longevity of a customer relationship or customer retention or brand awareness.<\/p>\n\n\n\n Overly-simplistic Marketing Measurements. <\/strong>You need a baseline for sales in order to measure your ROI correctly. To measure accurately, you really need to take the full picture of the circumstances into account. What events were happening? Politics? Season? Weather? Other trends?<\/p>\n\n\n\n So Many Marketing Channels!<\/strong> Many channels mean many touchpoints. This makes it harder to get all of the different measurements and pull them together for really impactful insights. And every touchpoint needs to be taken into account for accurate measurement.<\/p>\n\n\n\nWhat Does Marketing ROI Look Like?<\/h2>\n\n\n\n
Measure the success of your campaign and determine baselines.<\/strong><\/h3>\n\n\n\n
Assign your marketing budget.<\/strong><\/h3>\n\n\n\n
Perform a competitive analysis.<\/strong><\/h3>\n\n\n\n
Calculating Your Return On Investment<\/strong><\/h2>\n\n\n\n
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What if you want to know how it\u2019s gone for the year? You probably want to know year-over-year growth. The formula looks like this: YOY Growth = (last year\u2019s total \u2013 this year\u2019s total) \/ this year\u2019s total) x 100<\/strong><\/h4>\n\n\n\n
How Do You Know If Your Marketing ROI Is Good?<\/h2>\n\n\n\n
Challenges of Calculating ROI<\/strong><\/h2>\n\n\n\n
In Conclusion<\/strong><\/h2>\n\n\n\n