With employees to care for and bills to pay, small businesses have to be smart with their budget and spendings. Hence any time you spend some money, you need to be sure the expense is worthy. Several small businesses are often hesitant to spend on marketing as they struggle measuring the payoff. Today, we are here to show you how to prove the fruits of your marketing and advertising by digging into the following:
- What is Good ROI for a Marketing Campaign?
- What Exactly is Marketing ROI?
- How to Measure Marketing ROI?
- How to Improve your Marketing ROI?
As you understand what marketing ROI is and evaluate how to measure it, you can set your creative web marketing budget with more confidence while refining your approach to get more value from your marketing expenditure.
What is Marketing ROI?
ROI means Return on Investment. Marketing ROI includes how much you spent on marketing compared to how much revenue is made in return. Yes, the trick with calculating ROI is parsing out how much revenue is a direct outcome of a specific marketing effort compared to how much is driven by the other factors. Specifically, in today’s world, it can seem almost impossible to figure out where certain customers come from.
How to Calculate ROI for a Marketing Campaign?
So, let’s stick with a simple formula for calculating the marketing ROI i-e
“Marketing ROI = Sales Growth – Marketing Cost) / Marketing Cost”.
Let’s use this formula in an example:
You are opening a new cafe or a shop. In order to advertise, you run an ad in a newspaper. All told, including the cost of space in the newspaper, you spend £1000. During your first week, you sell £1500 worth of your products. In such a case your marketing ROI is:
(15,000 – 1,000) / 1,000 = 14/1
This gives you an ROI of 14:1. Hence, for every pound you spend on creative web marketing, you earn £14.
The trick is that you are never sure that everyone who purchased your product did so because of your paper ad. Perhaps, they are just driving by. Or, maybe they overheard a person talking about your shop in line at another store. Well, such an involved formula can calculate your marketing ROI while minding your growth.
What is Good ROI for a Marketing Campaign?
Since you understand how to get to that number now, what does that number mean? Well, a strong marketing ROI is 5:1. Similarly, in case you are making 5 pounds for every 1 pound you have spent, you are doing a decent job. An exceptional ROI can be 10:1 where you are getting 10 pounds for every pound you spent.
In case your ROI is 2:1 or lower than that, you are likely losing some money on your marketing expenses. It is because by that time you factor in costs to sell and manufacture the product you are marketing, you are in fact in the red.