What was the return on investment (ROI) for your last marketing campaign? If you can’t answer this question, you’re not alone. According to a HubSpot survey, 40% of responders felt that proving the ROI of their marketing activities was their single biggest marketing challenge.
The key to successful marketing, as with any business function, is to repeat what works. If you know which marketing activity brought in the most sales or customers for the least amount of money, then you can replicate it and stop wasting money on marketing that doesn’t deliver results. Calculating your marketing ROI enables both.
Don’t worry, it’s easier than you might think. There are more complex approaches to quantifying marketing ROI, but here are three simple steps to get started.
1. Track Revenue by Campaign
Do you have a new white paper download to capture a lead’s information via your website? How about an upcoming trade show? For simplicity, let’s consider each of these marketing efforts a campaign.
Use your customer relationship software (CRM) or marketing automation tool to tie a lead source to a specific marketing campaign. When they ultimately become a customer, be sure their record also includes the revenue expected from the customer relationship. If you don’t have a CRM or marketing automation tool and your new customer volume is low, don’t be ashamed about using a spreadsheet for now.
2. Track Cost by Campaign
Costs will vary depending on the type of campaign, but here are some of the sample costs you should include in your calculations:
- Content generation: Writing or article fees (or labor costs if writing was done in-house)
- Advertising: Google pay per click, Facebook boosts or Tweet promotions
- Software/subscriptions: newsletter creation social media posting tools
- Marketing partners: Ad agency fees
- Labor: In-house labor costs related to creating and managing a campaign
- Events: Trade shows, webinars
3. Calculate ROI
(Revenue from Campaign – Campaign Cost)
__________________________________________________ x 100 (to get a percent)
For example, let’s say you introduced a new eBook that resulted in 8 new customers who represented a total of $20,000 in revenue. If you paid $1,000 for the creation of an eBook, $400 on in-house labor to design a landing page for it and $3,000 to promote it via Google ads, your total marketing expense for that campaign was $4,400.
So your calculation would be ($20,000 - $4,400) / $4,400 x 100 = 355%.
For extra credit, calculate your per customer for each campaign: If 8 companies, who ultimately became customers, downloaded the free eBook, your cost per customer was $550 ($4,400/8=$550. That cost per acquired customer figure can be very powerful to compare the results from other campaigns.
All too often, small business marketers make key decisions on where to invest their marketing dollars based on gut feel. But, data driven decision making is as relevant to your marketing initiatives as it is to your finance function. By following these simple steps, you can leverage the resulting insights to inform your marketing decisions and ultimately accelerate your firm’s growth.
Dave Robinson is author of An Owner’s Guide to Competitive Advantage Through Financial Management and founder of Driven Insights, a firm that serves as an outsourced finance department for small businesses. He graduated with honors from Dartmouth College and earned his MBA from Harvard Business School.