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How to Calculate your Marketing ROI
- Blog
- How to Calculate your Marketing ROI
- By Heather Stewart
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So you put a bunch of money into marketing campaigns this past year to try and drive more consumers to your business. Now that your campaign has wrapped up and the year is closing, you’re probably wondering just how exactly it benefited your company. Fortunately, there’s an easy way to calculate that, and here are the steps.
Did your marketing campaign win or lose money for you this year?
It’s called the Marketing Return on Investment, or Marketing ROI, and it’s how you determine if the money you put into something brought in enough revenue to make it worth it.
Evaluating the year is a crucial element to your
continued success and growth for the year to come.
This quarter is the perfect time to reflect and reevaluate your efforts and to figure out the ROI of your marketing activities.
Determining Your Marketing ROI
Most businesses only have a set amount for advertising and marketing in their budget, so, understandably, CEOs and Directors want to make the most of that particular line item.
The most common way to determine your marketing ROI is to take your total revenue, subtract your investment to find your profit. Then divide your profit by dollars invested in the campaign and the final number is your Marketing ROI percentage.
So, if sales grew by $1,000 and the marketing campaign cost $100, then the simple ROI is 900%
This is a fundamental way to measure your marketing ROI, and it provides you an idea of how well your investment did overall.Planning Your Marketing ROI
When planning your marketing ROI, you must first set clear goals; are you trying to get more engagement on social media? More customers through the door?
Once you can define the actual goal, you can better determine your ROI at the end of the particular marketing campaign. Poisonous
You’ll also want to set an appropriate budget, especially for online marketing. Digital advertising targets specific demographics with cost per view, and the budget can run away from you if you’re not careful, especially on social media.
You want the most bang for your buck,
so really take the time to assess who your target market
is and adjust accordingly.
Your marketing budget should be a percentage of your revenue. With Business to Business (B2B) companies spending 2 and 5%, and Business to Consumer (B2C) companies spending 5 and 10% because B2C companies typically need to invest in more marketing channels to reach various customer segments (rough estimates that don’t take into account company size, competition, etc.) In a survey conducted by BDC the results indicated that Canadian small businesses marketing costs average $30,000 per year. With the larger the company the budget increases. (Source: BDC)
Other things to consider are the money you put towards the campaign and the cost of human resources. You’re paying for a targeted social media campaign, but how much time and effort went into the graphics you used? Were they created in-house or outsourced? Are you paying for stock images, or is a staff member taking photos?
These are all part of the investment and need to be taken into consideration when calculating your marketing ROI.
Looking Back and Ahead
You are likely looking through the campaigns and initiatives taken to evaluate your marketing ROI during this time of year. You are required to provide a marketing ROI analysis and you have begun to assess the success of some and the significant flops of other digital marketing efforts.
It is okay, remember sometimes failing in one avenue only brings you closer to the best solution.
Over the next couple of months, as you reflect over the year, remember that learning is a part of growth, including learning what does not work. If there was a campaign this year that allowed an incredible marketing ROI, then adapt it for this year ahead, see what more you can do.
These next few months are an excellent time for reflection, evaluation, and creation for new things to come. Your business is essential, and ensuring your marketing efforts bring a return of investment is vital to your growth and sustainability. If you need help evaluating your year, set up a consultation with us today, it will be the most valuable time you have spent this year.
BCD. (Not Available). What is the average marketing budget for a small business? Retrieved: https://www.bdc.ca/en/articles-tools/marketing-sales-export/marketing/what-average-marketing-budget-for-small-business
Post Author
Heather Stewart
Heather has a substantial background working in Federal and Provincial politics. She has created content for a variety of elected officials from coast to coast. Her communications background in both the public and private sector has provided her with ample experience in writing, strategic social media planning and marketing initiatives.
