How to calculate Return on Investment (ROI) for your marketing?

Posted on Posted in Finance, Marketing

How to calculate Return on Investment (ROI) for your marketing?

 

It is common for clients to question you about the benefits they’ll receive when working or investing with you. Whenever you strike up a deal with any customer, you might have been asked what the ROI is?

This might turn off a few companies. However, it should not!

This is a good trait as clients who ask these questions are serious about working with you. And once you’ve shown them your products they are bound to stick around! You need to measure the ROI before running any marketing campaign as it can be a huge risk.

You can never be sure whether your campaign will definitely work or not if you don’t have any data. You need to have some solid data so that you know which areas require you to spend more money on and which you can cut off.

Having a positive ROI in marketing is your license to print out money! However, before you decide to put your money into any such machine, you need to make sure that the machine works!

There are different ways you can calculate marketing ROI, and whichever method you choose depends entirely on what type of business you own and also your personal preference.

The most basic and easy way of calculating marketing ROI is by using the following formula,

“ROI= (sales growth-marketing investment)/ marketing investment“

By using this formula, you’ll be able to calculate the ROI in percentage. Whatever ‘sale’ production you gained and whatever money you invested, you’ll plug the amount into this formula which will then give you the ROI calculated in a percentage.

Also, take note that ROI can be described as a way to know if every dollar you invest into your marketing campaign can also give you back that dollar along with an additional profit.

Now this formula is more suitable for businesses that sell one-time services and products. However, if your business is based on recurring sales, then this formula might not be the right one for you.

For businesses that are based on recurring sales the best method for calculating marketing ROI would be the Customer Lifetime Value Formula instead. This formula has many versions however this one is a simple one. To calculate marketing ROI for this kind of business, you can use the following formula:

“ROI= (customer lifetime value – marketing investment per acquisition)/marketing investment per acquisition.”

So, if you’re running a business and your average consumer is subscribed for a total of 18 months, and you know the amount of average revenue that you generate per customer, you will simply multiply the two to achieve your average customer lifetime value.

You will then find out the average cost of each of your customers and will then be able to calculate marketing return on investment using this formula. You need to understand that customer retention is extremely important.

Along with that, you need to focus on customer acquisition as well, as they will help in increasing the customer lifetime value for your campaign!

You need to understand that if you don’t measure your performance correctly, you won’t be able to find the correct ROI. To make accurate calculations of ROI, you need to track and measure everything as accurately as possible!

How to calculate marketing ROI?

Well, Google Analytics is a powerful tool that can help you out. You can find out the number of visitors your site is getting. Apart from that, you can see which websites are sending you referral traffic, find out whether your visitors are live, which devices are they viewing form, which marketing tactics are gaining you more traffic, how to improve your website’s speed, etc!

Also, if you have a wish to use an alternative to Google Analytics then you should opt for Hubspot Analytics to help you out. While both are the same, if you want to attain the best results, it is always a good idea to use them both simultaneously.

Billy is another alternative for you to check out! With this tool, you can shorten links and can then share them on different social media platforms. You can even use premium products that allow you to find out how many people are active on the links you’ve shared.

You can even create a custom brand link as well. Find out whether your audience is engaging or not remember the more information you have regarding your audience and its engagement than more accurately will you be able to calculate your ROI!

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