In business, we frequently ask what the ROI is of an investment of time/money. We want to know that if we spend $100, we're getting at least $101.00 back from it. That is a really conservative return, but you get the point. We don't want to spend money without making it back, plus some.
We see many small to medium sized businesses continuously spend marketing dollars in traditional, interruption based marketing tactics such as radio, newspaper and direct mail simply because they've always done it. It's a habit. The salesperson comes in and sells you what you bought last month or last year and throws in a new wiz-bang feature or 2 to justify a slight price increase and you say yes because you always have. Sound familiar? It's a very common occurrence in small/medium sized businesses that we start working with. When asked how those marketing dollars are performing, the answer is often vague and unclear. Some will say, I'd have to ask the salesman that sold us the advertising for his latest data. In reality, most have no idea and are simply flushing the marketing dollars down the drain.
When was the last time you calculated the ROI of your marketing efforts? I hope you did it at the end of 2013 so you can tell those salesman to take a hike next time they visit, that is unless you are seeing a positive return.
Calculate Your Marketing ROI
Traditionally, financial ROI is calculated with the following equation:
((Revenues From Investment - Investment Cost) / Investment Cost) X 100
For example, given the following values:
Net Profit (Revenue-Cost): $200.00
The ROI value should obviously be a positive percentage or you are losing on the investment. An example of a negative ROI would be:
Net Profit (Revenue-Cost): $-200.00
A Handy Marketing ROI Calculator
To make things very easy for you, we've put together a simple ROI calculator. It's important to remember a couple things about your calculation:
- If you don't know how much revenue you've made from a marketing investment, it may as well be $0.00. Why invest without measuring?
- You cannot forget to include staff cost for implementing a marketing campaign or tactic! This can often be larger than the ad cost!
If the Calculator doesn't appear, click here to open it in a new window