How to Calculate your Marketing ROI

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Measuring return on investment (ROI) is a vital part of any marketing activity and is a key component of every successful business. Marketing works to understand the needs of the customer and what initiates their buying decision, having a direct influence on profitability and sales.

Measuring the ROI of your marketing activity used to be a fairly straight forward process; however with the current digital landscape and the onset of complex challenges faced by the industry, return on investment has become more difficult to measure.

Return on Investment ROI is a popular metric when calculating marketing efforts and the value it brings to your business. The most basic calculation is usually represented in the following formula:

 (Sales growth- marketing cost) / marketing cost = ROI

This calculation may be suitable for the likes of lead generation, and sales, however it is not always so simple to calculate all aspects of your marketing ROI using this method. There are many intangible aspects such as brand awareness, social signals, customer engagement and satisfaction; which, whilst difficult to relate directly to sales, are nevertheless fundamental to the success of your business.

Marketing is not just around sales. Its aim is also to increase brand awareness and voice around your brand. Marketing is now the sum of all experiences someone has with your company.

So how can you effectively measure your various marketing channels and set meaningful benchmarks to develop them?

Revenue Growth– Generally speaking this is considered the prime metric. Are your overall sales increasing? Why? Can you effectively report on these results?  How many leads are generated from each of your current marketing channels, what sort of quality are they and how many have converted into enquiries or sales?

Google Analytics- Provides powerful insight into your customers and their online behaviour. You can identify the various routes customers take to arrive at your site, and their subsequent behaviour as they move through it. This will help you understand which channels are bringing you the most traffic and provide an opportunity to better understand which areas of your website make the highest contribution to the level of enquiries/ sales you receive. For example if your business recently introduced a blog page, which is being shared on social media, you may find there is an influx of traffic to your site as a result which arrives specifically to your blog pages.

It is also possible to monitor the keywords or phrases your customers used to find your business, which will suggest these are the keywords you should implement within your website in order to potentially further enhance your search volumes.

Whilst providing the ability to track online purchases; it is also possible to track non ecommerce conversions such as goals, which report on metrics including newsletter signups, pdf downloads, time on site, video views, downloads of reports/whitepapers. Setting up goals and conversions for your website will help you understand if your pages are meeting the customers’ needs and the objectives of the business.

With the in-depth results from Google Analytics you can then adapt your marketing strategy accordingly to market the areas and drive the campaigns that will deliver the best return on investment for your website. You have the facility to create customisable monthly reports which when compared monthly and subsequently yearly, you will be able to determine whether your marketing efforts are meeting your objectives and are aligned to your business model, whether this is to increase newsletter signups, online purchases or simply to increase your traffic to your company website.

Social Media and Social Signals– Put simply this has changed the way people all over the world live interact and communicate. It is also a quick and efficient way to reach a large audience at one time and to continue to do so. It is essentially free marketing, yet surprisingly a large number of businesses have yet to take advantage of these exciting opportunities to raise awareness of their company.

People now trust social media more than advertising; consumers are aware when they are being advertised to and prefer to read customer reviews and blogs when making a buying decision. Research has found that 75% of consumers go online to research businesses; four out of every ten will rely on social media or review sites to do their investigations, highlighting the importance of developing and maintaining a positive active social media presence.

Tools such as Hubspot and Marketo allow you to customise your various social channels and therefore monitor the posts and tweets that are important to you. It is also good practice to research other key players in your market and industry to see how they structure their marketing messaging, in order to set a benchmark for your company.

To calculate your marketing efforts on social media, ask yourself the following questions;

  • Have our social media efforts created or supported any new or ongoing relationships with new or potential customers?
  • Is our business seen as a thought leader and influencer in your industry that people follow for the latest news?
  • Is our reach growing with the correct audience?

Several of the major social networks have their own integrated analytics that provide remarkable insights into your social media activity including: Facebook insights, Google+ insights, Twitter and LinkedIn analytics.

Social media is a major driver of traffic to your website; this referral data can be interpreted through valuable reporting in Google Analytics which will allow you to maximise the potential of your social channels.

Customer Feedback– Feedback and retention rates are a valuable way to monitor your marketing efforts. For example if your customer retention rate is over 90% you know that your business must be doing something right. Whilst this may be due to a great service that you offer, it also may be due to the way your company brand is perceived and how you are positioned within your industry or sector, which is a direct result of the effectiveness of your marketing campaigns.

If you have a loyal base of clients, why not ask if they would recommend your service? Simply asking if they are aware of any other organisations that could benefit from your product or service could make a big difference to the amount of enquiries or sales you receive. Referrals can take the form of sharing your content on social media, forwarding an email offer to a relevant party or a face-to-face recommendation. People love to be referred, especially if they are already thinking about using your company’s service, or your sales team has already made contact with them, a referral can provide that last push to turn a prospect into a customer.

Net Promoter Score® is a good example of a measurement of customers overall experience of your brand. The framework includes questions that gauge customer satisfaction and allow clients to give feedback on 0-10 scale. The insights you gain from customer feedback is enough to help make the changes necessary to drive your business.

With the fast pace and constant change of the modern marketing landscape it is vital that businesses are aware of a growing number of increasingly important metrics to gauge the effectiveness of their on-going marketing efforts. Customer insight is a fundamental part of the buying process; once marketers gain this understanding they can use it to drive their sales team as well as to do their job more efficiently.

The marketing industry as a whole is constantly developing innovative ways to understand and interpret data to better understand and support the metrics we currently consider intangible; however no matter how complex or dynamic and data rich those solutions become, ROI will remain the first port of call for most businesses when reviewing the effectiveness of their marketing efforts.

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