How much return on your marketing investment should you expect?
A healthy return on your marketing investment is essential to the success of any campaign. To maximise ROI and make the most of your marketing efforts, begin with a clear goal, test and learn from the results, and evolve your strategy from there.
A healthy return on investment is essential to any marketing campaign
Return on investment (ROI) is a measure of how much money you make compared to how much you spent. It’s important because it tells you if your marketing efforts are paying off, and it can be used as a benchmark for future campaigns.
ROI is calculated using the following formula: ROI = Net profit/cost of investment x 100.
If you spent £100 on marketing and generated £200 of net profit, 200/100 = 2 (i.e. for every £1 spent, you made £2 back). As ROI is generally measured as a percentage, you multiply this by 100 to see that your ROI was 200%.
That said, a return on your marketing investment may not come through a monetary or sales value. Sometimes the goal of marketing is to raise brand awareness, increase profile, or enhance perception. You might not see an immediate increase in revenue because of this, but it makes your brand more valuable as a whole.
You can’t measure ROI without a clear goal
You can’t measure ROI without a clear goal. If you don’t know where you’re going, how will you know when to stop?
You should start by defining the problem. Then, set goals for yourself that are ambitious but realistic–and make sure those goals are related back to the original problem.
For example: “I want all my clients and employees to be more fit.” That’s fine as a start point, but what does that mean? How fit? Are there specific metrics attached? How much weight do they need to lose (or gain)? How many times per week do they need to exercise or move around during their day? How many calories per day should they consume in order to achieve their fitness goals? These things matter!
It’s the equivalent of saying “I want my business to make more money.” Great – how much more? Where from? Who are your ideal clients? What are you doing to reach them? What are you going to differently now? Why have you been unable to reach them up until this point? Does your product or service have enough mass-market appeal to grow beyond your current client base and turnover?
How much ROI should you hope to achieve?
When it comes to ascertaining how much return on your marketing investment you should be aiming to achieve, you need to factor in two things: what your goals are and how much money you’re willing to spend.
In general, a 5:1 ratio is considered a good rule of thumb for any marketing campaign; anything above 10:1 is exceptional but may not be achievable in all cases–it really depends on the industry and product/service being sold. Anything below 2:1 is not profitable (and probably won’t result in any sales at all).
However, every organisation is different, so there may be variable factors that affect how much ROI you can expect. It’s important to consider unique overhead costs, margins, and industry factors and standards unique to your sector.
The challenges of measuring marketing ROI
When you think about it, there’s no such thing as “return on investment” for marketers. If a company spends £1m on an advertising campaign and makes £2m in revenue from that campaign, that’s not a good ROI – it’s just an increase in revenue. If a company spends £1m on an advertising campaign and makes £3 m in revenue from it, then yes: That would be considered a successful marketing investment.
So what does this mean for companies? It means that marketers need to focus less on short-term gains and more on long-term strategy when considering how they measure ROI. This is especially true as omnichannel retail grows increasingly popular among consumers who require multiple touch points before purchasing any given product or service.
A/B testing is key to success
One of the key tools for achieving marketing ROI is finding out what connects with your target audience. A/B testing is a method of comparing two versions of something to determine which one performs better.
For example, you could compare two different landing pages for your website, and measure how many people click through and sign up for your product or service. You can also A/B test email subject lines using this approach, to see which one prompts more people to open the email and click through to your site.
Once you have results, use those learning to refine and improve your next campaign
Once you know what’s working, use these learnings to refine and improve your next campaign. You can do this by looking at the metrics that are most important to your business, such as:
- Cost per lead/sale
- Conversion rate (percentage of visitors who become leads or customers)
- Bounce rate (percentage of visitors who leave without viewing another page on your site)
- Social media post engagement and link clicks (how many people view your posts, and how many click the links for more information).
Making the most of your marketing efforts
To maximise return on your marketing investment and make the most of your efforts, begin with a clear goal, test and learn from the results, and evolve your strategy from there.
Before you can start making progress towards a goal, it’s important that you define what success looks like for you. This will help ensure that your efforts are well-focused on achieving the results that matter to your business.
It also helps set expectations so everyone involved knows what’s expected from them (whether that be a boost in custom, i.e. “get more people into our gym”, or knowledge sharing something related to your business, i.e. “write an article about how much protein powder costs”).
The best way to maximise ROI is by setting clear goals, only spending what you can afford, and testing the results of your marketing efforts. Remember, marketing is a marathon, not a sprint, so you may not see an immediate benefit from your efforts but you are building for long-term sustainability.