Numbers Matter: Finding Your Marketing ROI
Posted by Buffy the Bison | September 17, 2021
America has a handful of pastimes labeled our nation’s “favorite.” You’ve probably heard of the top three – music, movies, and most notably, baseball. Pair the last two examples together and you get, arguably, one of the most recognizable sports fantasy films of the late 1980s, Field of Dreams.
Wait, are we talking marketing or movies? Bear with me for just a few more seconds.
If you’ve seen this film or at least know someone who has, then most likely you’ve heard the famous line, “If you build it, he will come,” which often gets altered ever so slightly to the phrase, “If you build it, they will come.”
Now, while this phrase seems to be muttered the closer one is to the start of their business journey, the fact of the matter is...it’s false.
Building a business, even with the best systems, processes, and intentions, won’t open the floodgates of revenue. That’s why it’s imperative to have a detailed strategy to execute from the very beginning. And then once that strategy is executed, you can determine the best next steps for your business to take by collecting data on what worked and what didn’t.
In other words, you want numbers that tell you what to invest in and the exact return you’re getting from those investments, a.k.a ROI.
The Magic Marketing Formula
Okay, enough movie talk. Let’s get down to business.
There used to be a myth floating around that stated tracking ROI in marketing wasn’t possible. Luckily, we debunked that real fast.
Determining the fruits of your marketing efforts are nothing short of insanely beneficial to your business. And luckily finding your marketing ROI is fairly simple once you know what to look for.
The two big formulas to use go a little something like this:
Marketing ROI = ((Sales growth = Customers x Average Sales Price) - Marketing Cost / Marketing Cost) x 100
Website ROI = (Income – Website Cost)/ Website Cost
Marketing Strategies to Track
When tracking marketing ROI, what you’re really looking to identify is how effective your marketing strategies are in relation to your business efforts. Some of those strategies are digital marketing (paid social, PPC, email, etc.), content marketing, and website design.
Here are some practical examples of how to track these strategies effectively.
It’s hard to believe that there are still folks out there who think email marketing is a dying strategy. Luckily they’re entirely wrong.
Well, as of 2021, email marketing averages a return of $42 for every $1 spent. That’s an insane ROI stemming from digital marketing just ripe for the picking.
Here’s an example of how a hair care products business can determine ROI from email marketing campaigns
A local hair salon sends out a monthly e-newsletter to individuals who book a service through their website. The hair salon uses exclusive hair care products, and the hair care product business pays the hair salon $200 to advertise their most recent $20 product in the e-newsletter.
For every customer who clicks on the advertisement within the newsletter, they are directed to a landing page that has a trackable URL. From this URL, the business can see that 30 individuals clicked on the link, 20 added the product to their shopping cart, and 19 purchased it.
Using the formula listed above, the ROI from the email is:
((30 leads x (19/20) x $20) – $200)/ $200) x 100 = 185%
185% ROI is a positive result. If you like this outcome, you might want to consider promoting ads in emails with additional exclusive partners.
Blogging is an excellent way to produce content that your audience will use to identify you as a thought leader within your industry. But sometimes it can be difficult to find time to sit down and write, which leads to many businesses utilizing freelance copy and content writers.
However, before going all-in with this tactic, it’s useful to understand the ROI you’re receiving from these services.
Here’s how to calculate just that:
A budding financial firm needs to produce articles for their clients that explain the difference between tax avoidance and tax evasion. Their strategy is to utilize a budget of $800 and pay existing employees to crank out four different blogs on the subject. Each blog will link to a landing page that promotes a free consultation at your financial firm.
The blogs created by your financial firm professionals resulted in five leads, two that became clients. These clients average $3000 for your firm.
Using the marketing formula listed above, the ROI for your in-house blogging tactics are:
((5 leads x (2/5) x $3000) – $800)/ $800) x 100 = 650%
An ROI of 650% is no feat to scoff at. However, something to consider would be utilizing an agency with content specialists on staff who know how to use strategic CTAs and create tailored landing pages for your audience. While utilizing current employees is a benefit, especially for new businesses, it can eat up precious bandwidth and capacity quickly which can also diminish the quality of your content moving forward.
Websites are one of the most crucial marketing tools for any business, and should be viewed through the lens of an investment versus a luxury.
After all, your website serves as the virtual store front of your business and:
- Is a 24/7 sales person for your brand
- Explains your mission
- Shares your unique brand story
- Cultivates the reason why people should buy into your message
- Lays out in detail how your products and services solve very specific pain points
- Acquires leads that transition to conversions, and so much more
So, with that in mind, let’s do something many agencies won’t do – let’s be transparent with what a website really costs and how to track the return on investment you really receive when you focus on such a critical piece of your business.
Let’s say a new website redesign using the Growth-Driven Design (GDD) model costs $4000 over the next six months. That investment includes but is not limited to:
- Competitor analysis
- Website audit
- Persona profiling
- Content mapping
- Conversion strategies
- Custom website design
- Responsive design
While a smart investment by any stretch of the imagination, it’s still important to be able to justify it by determining a concrete ROI. That means if your average client brings in $3000 in revenue, your website should at least bring in 8 new clients, preferably more.
According to the State of Growth-Driven Design survey, the average agency reported a 14% increase in traffic and 16.9% increase in leads after six months utilizing the GDD model. So, with this knowledge in our back pocket, let’s run some example numbers using the website formula at the top of the page.
Let’s say your website brings in 6000 visits annually, or 500 visits per month. Let’s also assume the number of visits that turn into leads is 2.5%. That’s 150 leads per year. If you convert 20% of these leads, then you’ve acquired 30 new customers in one year.
To determine your ROI, you’ll simply multiply your new customers (30) by the amount of revenue they bring in ($3000) and divide by the cost of your website investment.
((30 x $3000)/ ($4000 x six months)) x 100 = 375%
Tracking ROI in marketing can be tricky, but it also serves an important purpose in directing your strategies to acquire optimal results.