Success lies in optimization. Constantly fine-tuning and tweaking performance and investment using clear ROI metrics means that campaigns move from underperformers to winners because they learn and evolve. The following benchmarks are the most common when it comes to ensuring that your marketing ROI is up to scratch:
- Cost per lead – divide the total campaign spend by the total leads generated.
- Conversion rate – assess these per channel and device.
- Cost per acquisition or sale – calculate this by dividing the total campaign cost by the sales generated by the campaign.
- Customer lifetime value – calculate this with the formula of: average sale per customer x average times they purchase per year x average retention time for a typical customer.
Each of these metrics will help you to gauge the long- and short-term success of campaigns and marketing endeavors. It’s important not to get hung up on them, however, but to instead use them as tools that help you to create more cohesive and capable campaigns.
The next step is to focus on how you can take these calculations and improve your overall marketing ROI. This can be done in numerous ways, most of them quite obvious to the talented marketing team. The first is to go back to the metrics you’ve been using to assess your campaigns and ask if they are the right ones and if perhaps these need to be adjusted to meet more relevant business expectations. Then, play around with the marketing channels on offer to you to see if you can see gains in areas that perhaps you didn’t expect – this can inform future campaign investment and strategy. Further refine this with A/B testing and clear budget outlines that provide clarity around spend and income.
The value of these approaches and methodical analyses cannot be understated as they allow for marketers not just to assess their approaches and campaign successes but to show the C-suite and decision-makers how every step within a campaign’s trajectory has been used to deliver a particular result.
Now you need to calculate your marketing ROI
It’s time to take your marketing ROI beyond the formulae and into fine-tuned perfection that fits your business. You want to create campaigns that really work. That do what you want them to do. And you want to be able to do this on demand, knowing that your choice of channel, tone, and approach is spot on every time.
Marketing ROI is reliant on the cost of your campaign versus the output, so you can start by assessing the ROI of a given marketing program to determine how this will shape investment moving forward. For example, you can use the formulae above to evaluate a campaign’s spend versus output value and then use this insight to gain additional budget. It’s a reliable way of justifying your spending while equally gaining insight into the total ROI your marketing efforts have generated.
The next step is to establish a baseline. This can be where campaigns start against where they end up, thereby proving the value of a campaign approach or particular omnichannel strategy. Or it can be used as a benchmark of success that every campaign needs to reach. Using metrics like A/B testing and cost per lead/acquisition/sale, you can further refine this baseline to ensure that your campaigns achieve their full potential.
Then, you’re going to need a benchmark of the competition. It’s always worth seeing how competitors are faring in your market and what tactics they’re using to capture its attention. Using this data, you can refine your campaigns to fill gaps or improve your approaches.
In addition to these steps, you can unpack your ROI against various calculations. These include your total campaign revenue, gross profit, and net profit and should be added to all the other cost factors such as agency fees, overheads, internal costs, creative costs, media and channel fees, and other unanticipated expenses. All these can then be combined to gain a clear financial picture of how your marketing efforts are performing against their cost to company.
Finally, ask yourself one very important question – what does all this mean in light of the customer? You must always bring the story back to the customer lifetime value, which includes their story within the brand story over their lifetime with the brand. It’s not an impossible metric to measure, and it is one that has proven invaluable to marketing teams in the past. To assess this, simply subtract your customer revenue from the cost of acquiring them, and you’ve got their lifetime value.
This lifetime value is, well, invaluable. Not only is it more expensive to woo new customers, but loyal customers spend more over their lifetime, which means they deliver constant ROI to the brand.
Marketing cost is any incremental cost that’s incurred during campaign execution
No marketing campaign is free. This is what makes the ROI conversation so important. Without return on this often very expensive investment, companies aren’t going to put more spend in the marketing bucket. Nor should they – the cost is too high to drip funds down a well that’s run dry.
Metaphors aside, several costs are impossible to avoid when it comes to building up a genuinely impactful marketing campaign. These are:
- Media spend
- Content production
- External marketing fees
- External agency fees
- Display ad clicks
These costs are factored into the ratio mentioned earlier, the one where if you get 5:1 ROI, you’re doing a great job and should carry on doing what you’re doing (fine tweaks to optimize campaigns aside). You can use this ratio to squeeze every last tiny drop of value from your spend and to ensure that your campaigns constantly and consistently maximize their impact.
ROI measurements should account for external factors
Earlier, it was highlighted that external factors are not incorporated into the assessments of marketing ROI as often as they should be and that they are too simplistic and lack visibility into long-term gains.
First, don’t use old and outdated models of attribution to assess your success and ROI. They can no longer provide the level of insight required across the multiple channels used by marketing and the new metrics that define marketing’s success. You also need to consider the customer journey and how the touchpoints they go through before they even consider a purchase have increased exponentially alongside digital and omnichannel. Now, the average customer goes through six to ten touch points before they buy, and so measuring this ROI asks that you assess every one of these – both online and offline.
All of these factors, from the ratio through to the formulae through to granular analysis of every channel and platform, contribute to your marketing ROI and determine its actual value. Using these steps and approaches, you can streamline your marketing and create more efficient campaigns that deliver measurable results. Now, get out there and measure because there’s no time like the present to transform your marketing strategy and spending.
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