Marketing ROI Key Concepts & Steps

[Maliha Islam]

Marketing ROI Key Concepts & Steps

Before you begin
It’s a good idea to measure ROI on all of your marketing investments – after all, you’re in business to earn a profit. If your sales process is long and complex, you may choose to modify or simplify your ROI calculations, but a simple calculation is more useful than none at all.

Confirm your financial formulas
There are several figures you’ll need for your ROI calculations:

Cost of goods sold (COGS): The cost to physically produce a product or service.
Marketing investment: Typically you’d include just the cost of the media, not production costs or time invested by certain employees; however, in certain cases it may be better to include all of those figures.
Revenue: It can be tricky to tie revenue to a particular campaign, especially when you run a variety of campaigns and have a long sales process. Your finance team may have some suggestions for estimating this figure.
Companies calculate these figures differently, so confirm the formulas your company uses — your finance team or accountant can guide you.

Establish an ROI threshold
Set an ROI goal for your entire budget and individual campaigns; set a floor as well. By doing so, you gain more power over your budget. If you project that a campaign won’t hit the threshold, don’t run it; if you can’t get an ongoing campaign over the threshold, cut it and put your money elsewhere.

Set your marketing budget
When you have an ROI goal and annual revenue/profit goals, you can calculate the amount of money you should spend on marketing – just solve the ROI formula for the “investment” figure. You’ll be more confident that you’re spending the right amount of money to meet your goals.

Calculate ROI on campaigns; track and improve your results
Tracking ROI can get difficult with complex marketing campaigns, but with a commitment and good reporting processes, you can build solid measurements, even if you have to use some estimates in the process.

Use your ROI calculations to continually improve your campaigns; test new ways to raise your ROI and spend your money on the campaigns that produce the greatest return for your company.

After Marketing ROI
The more you understand ROI, the more power you have over your investments. Continue to learn, improve your reporting capabilities and use ROI to improve your campaigns and generate more profit for your company.