How to Calculate Marketing ROI
When it comes evaluating your marketing strategy, knowing the hard facts of your return-on-investment (ROI) is essential for knowing where to spend more or less marketing dollars.
What’s the ROI?
Your marketing return-on-investment (ROI) is the amount of profit made from a marketing campaign.
Judging the success or failure of a marketing campaign doesn’t have to be difficult. A few simple formulas will help you make the smart decisions you need to get the most out of your marketing dollars.
How do I Calculate my ROI?
Your ROI can be calculated in a few different ways. If you want to know how much money you made from your marketing spend, you can calculate your overall ROI with this formula:
(Sales Growth – Marketing Investment) / Marketing Investment = ROI
Example:
You have placed an ad in a magazine for four months at an overall cost of $8,000. This ad has generated $100,000 in additional sales for your Kitchen & Bath remodeling business.
($100,000 – $8,000) / $8,000 = ROI of $92,000 or 1150%
How do I Calculate my Cost Per Lead?
For some companies, calculating your marketing ROI by tracking your overall cost per lead can be a simple approach to judging the relative success of your marketing campaigns. You can calculate your overall Cost Per Lead with this formula:
Marketing Investment / Leads = Cost Per Lead
Example:
You have placed an ad in a magazine for 1 month at an cost of $1,000. This ad has generated 20 additional leads for your Kitchen & Bath remodeling business.
$2000 / 20 = $100 Cost per Lead
What is a lead conversion rate, and how do I calculate it?
Getting a lead is only half the story, what happens with the lead is where your marketing expense is converted into increased revenue. Not all leads sources are created equal. You may get twenty calls from one ad, and only 5 from another. Understanding how many of those leads turn into sales will help you see the relative value in each ad. You can calculate your overall Lead Conversion Rate with this formula:
Sales / Leads = Lead Conversion Rate
Example:
You have placed an ad in a magazine for 1 month at an overall cost of $1,000. This ad has generated 20 additional leads for your Kitchen & Bath remodeling business, of those 20 leads you closed 2 sales.
5 / 20 = 25% Lead Conversion Rate
What is the most reliable data for tracking my ROI?
Although many business owners rely on their employees to help them track the success or failures of their marketing campaigns, you need hard data to know the truth about what is and isn’t working nothing can give you a more accurate view of your ad performance than call tracking. Learn more about our Free Call Tracking.
Added benefits:
- Protect your business line from spam and solicitation calls
- Review employee performance to improve customer service
- Automatically calculate ROI with dashboard reporting
What makes customers take action?
When I was a sales manager, I worked with a very talented marketing manager who would often ask me, “what is making our customers call us; is it the new email, our recent tradeshows, our webinar series?” My reply would always be “YES”! After he stopped looking confused, I would share with him that all of these marketing efforts were contributing to our increased sales.
Marketing is about promoting just the right thing, to just the right person, at just the right time. Ask your Marketing Consultant to show you how to make the most of your print adverting dollars by advertising in TheHomeMag.
Summary
The goal of any marketing campaign is to produce a positive return on your investment. You’ll never know where you are wasting your time and money if you don’t develop an easy way to measure your results.