Do You Know What Your Marketing ROI Is?


Do You Know What Your Marketing ROI Is?

When I see the word ROI it immediately takes me back to French classes at school where ROI meant King. But that’s not the context that we use ROI in business. Rather ROI is an abbreviation for Return on Investment and specifically when talking about marketing ROI, it’s the income you receive as a result of spending money on marketing.

Like every other number within your business, the key is to find a way to measure it, set goals and then see how you track against the goals. The challenge for many businesses is in the measurement.

If you sell via a personal communication whether in person or over the phone, you need to ask the question, “How did you hear about us?” or “Did you call today because you saw our ad in ….?” Or another similar question that will hopefully elicit an answer that will tell you where they heard about you. Having found out that information you need to have a system to keep track of the information.

What you’re looking to find out is whether the marketing work you are doing is converting into sales and money in your bank account.

Selling in person

Let’s consider the following example of a business coach who is doing promotions through Facebook ads and Google AdWords whilst at the same time sending out newsletters to a large database. After asking the question from each person who has made contact about her services we have the following information:

The ROI for each is:

Facebook = $32,000/$560 = 5700% or $57 for every $1 spent.

Google AdWords = $6,400/$1,480 = 432% or $4.32 for every $1 spent.

Newsletter = $44,800/$600 = 7466% or $74.67 for every $1 spent.

This shows the highest return from the newsletter, however if the newsletter is monthly and she only puts an offer in once every three months, the return reduces to $24.88 for every $1 spent which is still better than the Google AdWords but not as good as the Facebook ads.

Selling online

When you sell online you can also ask the question, “How did you hear about us?” or similar or you could use coupon codes with a special offer that is different for each marketing campaign and use the coupon codes to gather the same data to identify how well your marketing efforts are working.

But what if you don’t want to offer discounts and your system doesn’t provide the flexibility to ask the question?

I’ve recently been working with an online product business with this exact situation. The business has been spending significant amounts on advertising in various forms and has no idea of what is working and where they’re getting the best return on their investment. In the early days of the business there was no question that the advertising was bringing in the sales, but as time went on they continued with the large expenditure but weren’t seeing any further increases in revenue.

Taking a giant leap of faith, they decided to test what would happen if they stopped the advertising completely. For a whole month, they didn’t advertise and to their surprise the sales numbers held fairly steady. Now they’re looking at alternative promotions and different types of advertising to reach a different market.

The key to ongoing marketing is to do one at a time and see how it impacts their sales figures. This isn’t ideal, but it’s the best option they have with their current systems. In the future, they’re looking at how they can capture the data during the sales process to give them more accurate information.

In Summary

If you’re doing any marketing whatsoever, consider putting in place systems to capture the information from your clients or customers to determine where they heard about your business or product. Once you have this data, you will be in a better position to determine where to spend your marketing money to give you the best results. So you could say that ROI is king in marketing as it not only provides you with the return on investment but allows you to be king of how you spend your marketing budget.

Views All Time
Views All Time
Views Today
Views Today

“The opinions expressed by Smallville Contributors are their own, not those of"

Recommended Posts

Leave a Comment