How to Understand Your Marketing ROI

Devon Wilson

Devon Wilson About The Author

Jan 13, 2021 1:15:00 PM

 

How to Understand Your Marketing ROI

ROI, or return on investment, is the measurement of what your campaign has accomplished. For an advertising campaign, that often means focusing on what progress you see toward your overall goals. You may need to measure ROI based on the specific factors that you chose to focus on during the campaign. 

Learn More About Measuring Your ROI

How Can You Identify a Good Marketing ROI?

How to Understand Your Marketing ROIROI may depend on a variety of factors. You want to see positive ROI from your marketing efforts, but determining "good" ROI may depend on your industry and the type of ad campaign you’re running. Email marketing, for example, has an average ROI of around $38 for every $1 spent. For other forms of advertising, you may expect a lower overall ROI. In general, you would like to see a 5:1 return on your investment. That positive ROI indicates that you have a strong understanding of your target audience, you are creating marketing materials that speak to them, and they are responding to your efforts. 

Marketing ROI Formula

You don't have to be a math expert to measure your ROI, but you do have to have a basic understanding of your overall marketing efforts and how they impact your sales. The basic formula for understanding your marketing ROI requires you to identify:

  • The number of leads acquired as a result of your ad
  • Your lead-to-customer rate (that is, the number of leads that convert as a result of specific ads)
  • Your average sales price
  • Your ad spend

Calculate ROI using this formula: [((number of leads x lead-to-customer rate x average sales price) - cost or ad spend) ÷ cost or ad spend] x 100.

Now, you have the immediate ROI from your marketing efforts. To make the most of that number, however, you must consider what it means and how that ROI impacts your marketing decisions. 

Understanding Your ROI

How to Understand Your Marketing ROIWhile the formula above will give you a basic understanding of your ROI, measuring return on investment can look different for each campaign, depending on your specific goals. To understand what your marketing has accomplished, you need to start with a solid understanding of what you wanted to achieve with that campaign. You need to know the "why." 

Did you create a campaign to raise brand awareness? Or do you want to share information about the opening of a new location with your customers? To understand your ROI, you need to know what you want to achieve at the onset of your campaign. 

The Importance of Consistency

Ideally, each time you measure your ROI, you should look at it through the same platform and in the same way. You don't want to change your perspective since this could make it difficult for you to see how your advertising efforts impact your goals. Use a CRM system like HubSpot, which will automate processes for you, consolidate information, and better layout the data. 

Revisit Your Goals Regularly

How to Understand Your Marketing ROIAs you run your marketing campaigns, make sure you revisit your goals. Take a look at your campaigns to see whether they are helping you achieve results. Are you seeing increased leads through a specific platform? Does your target audience respond better to a specific type of strategy? Optimize your marketing efforts to keep up with consumers' needs. 

The Challenges of Measuring Marketing ROI

Often, marketing measurements are too simplistic, too focused on short-term results, or use outdated goals or models. They may fail to reflect what your marketing campaign is accomplishing, or they may not have the capacity to measure your long-term marketing efforts. When it comes to marketing effectiveness, consistency is key. You need to keep up your regular marketing efforts to help you achieve your long-term goals. Ensure you track your actions and metrics over time to better understand what they are accomplishing. 

Understanding your ROI can help you better plan your campaigns and keep a closer eye on what you are accomplishing. Working with a media partner can help increase your ROI, give you a better understanding of your target audience, and improve your marketing efforts to achieve your goals.

The Ultimate Guide to Measuring ROI

Topics: Marketing ROI