If you’re investing time and money into your marketing, it’s helpful to know your marketing ROI (return on investment). Tracking your ROI can help you understanding what’s working, what’s not, and where to focus your resources for the best results.
What is marketing ROI?
Marketing ROI shows how much revenue your marketing efforts generate compared to how much you spend. It answers a simple question: Are your marketing activities bringing in more money than they cost?
Here’s the basic formula for calculating ROI:
(Revenue from marketing – Marketing costs) / Marketing costs x 100 = ROI percentage
For example, if you spent $1,000 on a campaign and it generated $5,000 in sales, your ROI would be 400%.
Set clear goals
Before you can measure success, you need to know what success looks like. Are you aiming for more website traffic, leads, sales, or brand awareness? Clear goals help you focus on the right marketing efforts and track meaningful metrics.
It’s worth noting that not every marketing effort will be tied to a goal and a metric. For example, social media is a must-have piece of the marketing puzzle for most organizations these days. If your primary social media goal is to sell products, then tracking your social media ROI is helpful. If your primary social media goal is to build trust with your audience, that doesn’t fit neatly into an ROI calculation.
Track the right metrics
Focus on key performance indicators (KPIs) that align with your goals. There are many common KPIs you might track, including:
- Website traffic
- Conversion rates from web, email, or social media
- Cost per lead (CPL) from digital or print advertising
- Lifetime value of a customer (LTV)
Now, we know that many small organizations — and when we say small, we really mean micro-organizations that are 10 or fewer employees — aren’t often tracking things like cost per lead or lifetime value of a customer. And that’s okay if you’re not tracking them yet! It’s good to know what they are and how to track them as you grow.
Use analytics tools
Leverage tools like Google Analytics, your email or CRM systems, and social media insights to track performance data. These tools can show you where leads and sales are coming from in your business. Be sure to ask new leads where they heard about you so you can factor that into your data!
Calculate the costs
Include all costs related to your marketing campaign, such as strategy, content writing, design, ad spend, etc. This ensures an accurate ROI calculation.
Review and optimize
Regularly review your data and make informed decisions about where to adjust your strategy. Keep in mind that it can take six months or more to really see the impact of an investment in your marketing! So, don’t get discouraged in your month two numbers don’t show much change. Keep up the consistent effort over time to really see the impact on ROI.
Measuring your marketing ROI doesn’t have to be complicated. With clear goals, consistent tracking, and smart analysis, you can make sure your investment of time and money is helping grow your business.