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Understanding and Proving Marketing ROI


Dustin Brackett
April 1, 2016

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The goal of every marketing campaign is to show a positive ROI (Return On Investment). That's the name of the game. You want to spend a little money to get a lot back. A successful campaign will accomplish this, but what if you don't know if it was successful or not?

Simply, return on investment is the profit from a particular campaign divided by the cost of that campaign, usually expressed as a percentage.

ROI is a touchy subject in the traditional marketing world because, with most outbound tactics, it's very difficult to measure ROI accurately. As an example, when purchasing a billboard, the billboard company will be able to give you a DEC (Daily Estimated Circulation), which is the estimated amount of people that will pass by your billboard on any given day. This is great information, but how many of them are in your target market? How many sales were a direct result of your billboard? 

Traditionally, the only way to get an idea of the ROI of your campaign was to have a separate phone number for that campaign, a separate URL, or a special deal if you mentioned the billboard. It's very hard to keep track of all of that, and you're relying on your customers to act exactly how you'd like them to. What if someone saw your billboard that had a specific phone number to track that campaign on it, but they didn't take down that number and Googled your business for the phone number instead? You now have no idea that this customer was a result of your billboard ad. 

Proving ROI is very important to running effective marketing campaigns. Let's dive in further...

As we've talked about, with most outbound marketing campaigns, it's very difficult to measure ROI. We talked about billboards, but the same is true of radio spots, television commercials, and many others. 

Enter inbound marketing. What's great about all digital marketing is that you can easily track information in order to prove a return on investment. You can also adjust your campaign immediately to improve your ROI by focusing on tactics that are proving successful.

Let's take a look at how inbound marketing tactics can help you prove ROI and how you can adjust on the fly so that your ROI continues to be positive.

 

Leads

The first thing you need to do is to capture your leads. This is usually done with a call-to-action, landing page, and thank you page. Capturing that lead through a form on your landing page will immediately be tracked. Once that lead is captured, you can then track everywhere your lead visits on your site, where they are coming from (the next step), and what content they are ultimately consuming. 

 

Sources

Understanding where your traffic and leads are coming from is the next step. You can see the source of your lead (Facebook, Twitter, Google, Bing, direct, LinkedIn, referral from a specific site, etc.) You will then be able to get a better idea of where your marketing is working well to create new leads. If you're getting a lot of leads from LinkedIn but few from Twitter, you're able to see that and adjust your strategy to focus more on LinkedIn because it is showing a better return on investment.

 

Contacts

Once a lead has been registered, you want to understand what content that lead is interested in and returning for. Are they checking out all of your blog posts about a certain topic? How many times are they returning to your site before becoming a customer? How long does it typically take to convert them from a lead to a customer?

 

Customer

Ultimately what you want is for your contact to finally convert into a customer, right? This is the goal regardless of how you get there, but the tracking capabilities for inbound marketing outlined above will not only help you convert your leads to customers but will also help you to determine accurately which of your tactics lead them to become customers.

 

Calculating ROI

Now it's time to determine your ROI. For a quick example, if you spent $30,000 this year on your inbound marketing campaign and that brought you 50 customers (from inbound marketing tactics such as SEO, blogging, social media marketing, email marketing, content offers, etc.) with an average spend of $1,500 each, then your business made $75,000 from your inbound marketing campaign. Let's calculate your ROI:

ROIb.gif

For this example, it would be ($75,000 - $30,000) / $30,000 = $45,000/$30,000 = 150% ROI



There are more ways to calculate your return on investment other than cash, including social media followers, database growth, blog subscribers, and others, but cash is king. Take some time today to take a look at your marketing initiatives and determine which campaigns you feel are producing a positive ROI, have the potential to produce a positive marketing ROI, which are not performing well, and how you will measure and track your ROI.

After all, there is no point in running a campaign blind, hoping for results. It's also possible that you'll find that campaigns that are producing customers and you feel great about aren't actually as profitable as you thought.

GrowthPlan

 



 

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