Marketing ROI

identify and estimate roi from marketing

ROI is the buzz word you’ll hear in just about every business department. It seems everyone is always focused on ROI. Well, in case you are wondering about improving your ROI in your marketing department, keep reading. As you’ve read those first three sentences you probably felt like you had somehow got trapped in one of those executive-type of meetings where the bosses have gathered and want to throw around a few initial-based keywords and then leave just as quickly. Admittedly those opening sentences were written with a bit of humor intended.

It’s an all-too familiar business environment and it can be frustrating to just about everyone (except the stuffed shirt overusing the acronym). In fact, it can be so annoying you might be tempted to intentionally avoid those buzzwords. But your ROI, or Return on Investment, should not be avoided. Nobody says you have to overuse the three letter catch phrase to correctly identify and establish a plan for maximizing your profitability. Let’s talk for a bit about how you can analyze and plan for the best return on your investment without turning into a talking head throwing out annoying three-letter land mines.

What are the key factors in marketing that determine your potential return on investment?

We are going to look at the various key factors that determine your marketing ROI and then identify where you are overspending and where you are underspending. Before you jump ahead to recommendations though you need to follow through each of the following steps as it will be important to give you a full picture of your own marketing department.

Start by identifying your measurable expenses

The first thing to consider when looking to calculate your marketing ROI are the expenses involved in your marketing. You can’t properly identify your potential profits without knowing what your expenses will be. Let’s look at a short list of potential expenses you will have.

  • Software licensing
  • Integrations, customizations, and unique adaptations to your business
  • On-boarding and training
  • Data collecting and cleaning
  • Content creation
  • Email creation and delivery
  • Digital asset creation
  • Print asset creation
  • Physical marketing / distribution

There are many expenses once you start looking at how you spend money in your marketing. This list is definitely not comprehensive nor should it be. Every business will have a unique set of expenses. This list serves only as a general guide to cover some categories similar to many industries. (Great news: some of these expenses can be completely eliminated!)

Your homework is to create your own list of expenses. Identify everything you are spending for your marketing. Don’t exaggerate but don’t leave anything out either. If you spend 3 hours a month writing a blog post then be sure you calculate an hourly rate and add that cost as a line item in your expense list. You want to create a comprehensive total of all the expenses your marketing costs.

Estimate your intangible expenses

This is the second part of the identifying your expenses and admittedly this part is much harder. We need to identify and estimate the intangible expenses for your marketing. This means looking at metrics that you can’t measure and estimating the cost of each. Don’t let that phrasing confuse you, here’s a simple explanation. If you send an email newsletter you can calculate the cost associated with the time to create it, and the service you use to deliver it; but it’s much harder to estimate what it costs for each email to be read vs dropped immediately into a spam folder. Or another example, you can’t put an exact cost on maintaining brand consistency across your marketing.

Here’s a short list of potential intangible expenses

  • Maintaining brand consistency
  • Improving customer satisfaction
  • Maximizing email readability
  • Staying relevant in an industry

As you can see these are much more difficult to put an exact cost on. And you may identify other intangible or “soft expenses” for your marketing that haven’t been listed here. You should use this list as a guide to help you as you complete your marketing roi homework task.

Add to the expense list you created in the first homework section. Add values for each intangible expense. Again, this will be an approximation and you probably won’t be exactly right with these numbers but you need to create at least a baseline to give you a good understanding of you entire marketing expenses.

Next step, create your revenue projections

Once you have a good idea what your expenses will be you need to turn your focus to your potential revenue opportunities. What are the goals you want to accomplish with your marketing? What are the desired outcomes you want to see, Just as with the previous section this will contain both tangible and intangible aspects.

List your measurable revenues

The first revenues we will write down in our growing list are those revenues which we can easily identify. Here are a few examples of measurable revenues:

  • New monthly subscription
  • Single purchase customer
  • Purchase of services
  • Support and training sales

These revenues should not be difficult for you to determine, this is the reason your business exists and what your goals are as a company. Keep in mind all potential ways your business generates revenue.

Add a revenues section to your list (maybe you were so bold as to even create a spreadsheet?). Write down your measurable revenues. One thing you will need to consider is how you have quantified your revenues. You should create these items in the same metric as your expenses. (Does that sound tricky? Think of it like this: if your expenses are organized by month then you should organize your revenues by month as well.)

List your intangible revenues

This is often the part that is forgotten when creating an ROI analysis. You cannot focus merely on the measurable and tangible revenues. You must in addition to these also identify and recognize the intangible benefits of your marketing efforts. Since this is much harder to quantify and list as a definite amount you will need to be as precise as possible but recognize this as the most subjective of the entire marketing roi process.

Here are some examples of intangible benefits you will receive from your marketing efforts.

  • Expanded brand awareness
  • Improved processes and efficient marketing
  • Saved marketing hours
  • Reduced human error
  • Accelerated community growth

These are representative of a number of potential benefits you will receive from your marketing expenses. Your actual identified intangibles may be different.

List your intangible revenues on your worksheet. Do your best to quantify these with numbers but recognize those numbers may be subject to questions by others. Other “soft revenues” such as saved time can be more easily estimated. There are many ways to get an estimate on these values. Here is a resource that might be helpful.

Finally put it all together

Once you have compiled a list of all these different sections you can now begin to put it all together and determine your overall marketing return on investment. You can now perform some math (basic math) to identify what you are spending and what you are making as a direct result of your marketing. This is your ROI. You have created a list of what you spend and a list of what you make.

Of course you will need to keep in mind that there will be other factors influencing your company’s revenue beyond just the marketing expenses (e.g. the quality of the product, the demand for the product etc.) But this will give you a fairly good idea of how your marketing impacts your revenues.

One of the biggest marketing expenses is related to the various software tools you use. You’ll notice in the above lists that several items directly relate to your marketing software. Your marketing automation platform is instrumental in helping you save valuable time, improve your integrations, and increase your sales funnel size. This expense is one that no longer has to be included. Mautic provides open source marketing, powerful marketing automation, and possibly the best open source email marketing platform ever. With Mautic as your marketing automation platform you will be able to save not only extreme amounts of money each month but you will also find a huge saving in time as well. Mautic is open source marketing automation available absolutely free. Spend your marketing dollars on other items listed above and you’ll find a massive increase in your ROI as a result of the incredible value added by a free marketing software system.

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *