Are you under pressure to prove your marketing ROI? Find out how to calculate and optimize the ROI of your campaigns!
84% of professionals say they have difficulty and are stressed when it comes to proving their marketing ROI.
Why is it difficult to effectively measure the ROI of marketing campaigns? There is no lack of tools…
Another problem that companies often highlight is the inability to agree on a definition and a positive marketing ROI.
As a result, 61% of marketers do not integrate this indicator into their decision making, because they do not trust their own data. It’s crazy when you think about it, right?
Measuring ROI is critical to the growth of your business. So, to help you define, calculate and optimize your marketing ROI, we’ve put together this guide!
What is a good marketing ROI?
A good marketing ROI is a ratio of 5:1.
In other words: for every 1 euro invested, you should earn 5 euros.
However, this goal depends on your company, your industry and the competitive universe. The more competitive your market is, the lower the return on investment.
The main goal is to have a positive marketing ROI, at first, to try to optimize it later on.
In addition to these factors, the value of your marketing ROI depends on the type of marketing campaign.
For example, a lead acquisition campaign will certainly have a lower ROI than a strategy to retain your existing customers.
In the first case, the value of the first purchase does not always reach the cost invested in the acquisition. As a result, the ROI can be neutral or even negative. However, you have gained a customer who may become a regular buyer. Hence the importance of calculating your lifetime customer value, a valuable indicator.
With a loyalty program, you encourage repeat purchases. Your target already knows you and is (usually!) satisfied with your products or services. They will be easier to convert, which logically increases the ROI.
How to calculate the ROI of a marketing action?
One of the main challenges in calculating marketing ROI is the measurement approach. The formula to use is simple, but it is important to integrate all the elements of each component.
ROI on revenue or profit?
The trickiest part of calculating marketing ROI is determining what constitutes your “return” and your true investment. It’s up to you whether you want to consider:
The total revenue generated by a campaign
That is, the revenue generated by the increase in sales after a strategy is launched.
Gross profit
Or an estimate of the gross profit. This is the revenue minus the cost of goods to produce/deliver a product or service.
Net Profit
This is the gross profit minus the marketing expenses.
To have a complete global view, you can calculate all 3 data and evaluate them from one campaign to another.
Remember to take into account the hidden costs!
Another essential parameter for calculating the marketing ROI is to take into account ALL the expenses related to the campaign.
Very often, there are hidden costs that are not taken into account! It is easy to identify the cost of the marketing tools used, the ads launched on the different channels, the influence campaigns or even the fees of the service providers involved.
However, you should not forget the time spent by the sales people to convince the prospects, the salaries of the members of your team, the technical developments necessary for the campaign (creation of landing pages, visuals or videos, etc.) or even the sales delayed by possible technical problems on your website.
The special case of inbound marketing campaigns
In the specific case of an inbound marketing campaign, there are even more relevant figures to measure the ROI.
Here are the 4 main questions that will allow you to measure the ROI of an inbound marketing campaign:
#1 – How much does it cost you to generate a lead?
The cost of acquiring a lead is a measure you need to take into account to determine if the Inbound Marketing actions taken are consistent.
Just as there is a cost per customer, there is also a cost per lead. It is essential to know how much you have to spend to get a lead.
This indicator allows you to verify that you are carrying out the best actions to generate qualified leads.
To calculate it, you simply need to make the ratio between the cost of your inbound marketing campaign and the number of leads generated.
#2 – How much does a customer bring you over time?
3 letters symbolize this indicator: CLV, for Customer Lifetime Value.
Are your customers rather “One-shot” or loyal over years? Closely related to the notion of cost per lead, this indicator helps you to know your customers: the frequency of purchase, the average basket, the motivations to remain a customer with you.
By improving the CLV of your customers, you naturally impact the ROI of your Inbound Marketing campaigns.
To learn all about it, we wrote an article on CLV
To go further: How to calculate your Customer Lifetime Value?
#3 – What is your visitor/lead conversion rate?
The isolated data of the number of visits to your website is of little interest if none of them turn into leads.
The volume of leads generated tells you directly about the quality of your conversion tunnel. It’s better to have only 2000 monthly visits that generate 200 leads than 15,000 visits for 25 leads, right?
By analyzing the performance of each of your landing pages, and your content in general, you can determine which path is the most effective in converting your traffic into leads.
With this data, you can then optimize the ROI of your Inbound Marketing campaigns.
#4 – What is your lead/customer conversion rate?
It is important to measure the level of qualification and maturity of a lead in order to treat it in the best possible way.
To do this, you can rely on the Lead Scoring methodology.
To optimize the ROI of your Inbound Marketing campaign, you need to optimize the Leads/Customers conversion rate by identifying the most mature and qualified lead sources.
What tools should you use to track your marketing ROI?
You need to collect data from various platforms and analyze several metrics to calculate your marketing ROI.
Google Analytics
Google Analytics is a free tool that allows you to get an overview of the volume and behavior of visitors to your website.
You can visualize important data for the calculation of your marketing ROI like :
The number of visitors generated by each campaign
The behavior of visitors on each campaign
The impact of your natural referencing strategies
The impact of your Google Ads campaigns
The volume and value of conversions per channel and per campaign