How to Calculate ROI for your Marketing Efforts

by Lucas Hamon on February 15, 2016
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The marketing ROI calculation is easy; it's knowing what milestones we should be tracking that throws most

If you're thinking about executing an inbound marketing strategy for your business, and kicking the tires with an inbound marketing agency, it's a great time to start thinking about measurable objectives. It's important that your goals are attainable and clearly defined, so you can feel confident that you are walking down the right path.

Knowing HOW to calculate ROI is obviously a very important part to this process, so here it is.

     (Gain from investment - Cost of investment)     

Cost of investment

(For a full description and breakdown the ROI calculation, visit www.investopedia.com)

But how does one apply this to their marketing when historically, ROI for marketing has required business owners to take an extraordinary leap of faith?

It's an important question to ask, because for many owners, we're wired to think in terms of sales, and only sales, and ambiguous terms like "branding" make us feel uncomfortable, because there is no way to easily quantify the impact that it has on the bottom line. However, we don't have to think in those terms anymore, and we certainly shouldn't be.

With the inbound methodology, we're able to focus on very specific goals that lead to sales, and work toward reaching them by executing a formulaic strategy. In this article I will describe how to set the right goals, determine execution strategy, and realize positive ROI from marketing your business.

"If it doesn't work out, then I've laid out all of the cash, and have nothing to show for it..." Right?

I was talking to a business owner just the other day who was exploring inbound marketing for the first time ever. Several years ago they had another agency that helped their business grow by generating sales qualified leads that were ready for in-person sales appointments. On the upside, sales went up. On the downside, they owned noneof the collateral that was used to generate the leads, nor did they have access to the leads that didn't make it to that closable stage.

They know the price and the ROI, and although it was helping them grow, it was expensive. At the end, when the relationship was severed, they (my propsective client) have nothing to show for their investment other than yesterday's closed deals.

And it's because of this particular moment (what happens when the spigot is turned off) that we are able to more clearly illustrate a dividing line between the services being offered by most marketing agencies versus a sales agency.

What really inspired me to write this post was a statement I heard from the owner - something that I've heard from many in her exact position: "If it doesn't work out, then I've laid out all of the cash, and have nothing to show for it."

Like everybody else, she said this, not because she doesn't believe that inbound will work, but because she's used to an environment where performance is easy to measure and even guarantee (commission-based pay structures, for example), and she doesn't realize that with inbound, there is no "nothing-to-show-for-it" moment, because from the very beginning, you're putting together valuable marketing collateral and intel that will help you down the line, even after a slow or stalled start. She also doesn't realize that during the first 3-6 months, when the campaign is still taking hold, that we'll be able to track our progress towards our goals because we have tools that bring clarity and focus to objectives that, again, can be easily measured, and will tell us if we're on the right path and how to pivot if we're not.

Goal #1: Visitors to the website

The first goal of inbound marketing is to attract visitors to the website, because your site is the cornerstone to everything you publish digitally. It's your house, and you control how people discover your business and learn about the problems you solve.

So, we want to get as much traffic there as we can, but we also want that traffic to be of a certain quality. Meaning, we want them to be drawn to your site using language that they speak about the problems you solve, and have it delivered to them in a manner that flows with their individual buyer's journey.

This can be done through blogging, social media marketing, and email marketing. Just make sure that you're educating with your script, not stuffing advetorial fodder down your visitor's throats.

With this particular goal of attracting more visitors to your website, by itself we can't measure traffic quality. Nevertheless, it's an important milestone, and there should be goals set around it.

For this particular client, we determined that they needed 5,000 visitors per month. You'll learn why as we break apart the other two goals, but unlike the sales agency they worked with in the past, emphasis was not placed on organic traffic, which becomes a valuable business asset once you have it. And it doesn't go away just because you skip a blog. You own it. 

Goal #2: Leads converted from visitors

We're going to learn a lot about our visitors when we convert them into leads. We discover what content we publish that interests the good ones and what engages the rif-raff. We're also going to be able to use the data we gather to make decisions for the next phases of the project, and to know when it's time for sales to reach out to them directly.

The concept is pretty simple: more traffic should equal more leads, so many believe that the investment should be focused purely on website impressions.

However, if we just focused on traffic, and didn't install other mechanisms to capture visitors as leads, we would need 5 x as much traffic to reach our revenue goals, and that suddenly makes it an unreasonable goal knowing where we're starting from.

That said, for this particular client, we determined that our goal was 200 leads every month, which equates to 4% of the traffic coming in.

Goal #3: Customer conversions

This is the end-game, right? Customer acquisition? So, let's set a goal for customers converting from leads generated through your inbound marketing campaign.

Marketing alone won't close the deals for this particular client, because a demo is required, but it will get them more than 60% of the way there. In addition, the leads we gather that don't convert right away, so we continue to nurture them, because one day, 6 months or even years into the future they may still buy from us.

In this particular client's case, we are shooting for 20 new customers every month.



Now, connect the dots

Now that you have measurable milestones for your marketing team that lead to the end-game of closing more business and making more money, you'll be able to plug in numbers to that formula that show you your actual return on investment. As you're ramping up, you'll be able to keep an eye on the first and second indicators (visitors and leads) that prove whether your program is working the way it's supposed to.

5,000 visitors per month can be measured. 200 leads per month can be measured. And obviously, so can 20 customers... IF you have a good software program in place to manage and tie them all together. (more on that at www.orangepegs.com)

Want help with developing your inbound marketing objectives? Check out this handy ROI calculator that we created just for you!

Marketing objectives ROI calculator


 

Topics: Marketing Objectives, Sales Process, Marketing for SaaS

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