If this formula is so important and so easy to calculate the question is why we are not using it when it comes to some most important issues in our organizations.
Marketing is an ideal example representing those areas. Today you will still find many people talking about whether ROI on marketing can be measured.
With a little planning and organization a marketing measurement system can be set and continuous marketing reporting can be organized to give us the results we need to answer this basic question and in addition help us make better decisions and improve the marketing effectiveness.
Let’s review the idea of ROI and start from there towards measuring and tracking the marketing ROI
The formula for calculating any ROI is as follows:
ROI = (Profit – Investment) / Investment
This formula is used for evaluating various business projects as well as comparing different alternatives. The most important thing is that is simple to use – you only need two numbers to calculate: profit and investment. Based on your organization and the type of project you manage this formula can me modified to better aid the decision making, for example in marketing ROI, you can substitute profit with additional revenue, net profit or gross margin, revenue from new products… it all depends on what you need to measure and focus on.
Here is the single most important secret for measuring ROI on marketing: It’s Tracking
In order to be able to measure marketing ROI you need to be able to track everything related to your leads, prospects and customers. If you can do this you’ll be able to answer any ROI related questions in marketing and develop good KPIs for your marketing reporting and analysis.
How to develop marketing and sales tracking system?
The system you need to track where your customers, leads and prospects are coming from can be organized in many different ways and today it is easy and doable – it only requires a little planning. Here are a few ways you can organize your marketing system for tracking and reporting:
Plan your advertising for tracking. Use different and unique ads for different advertising and promotion channels.
You have seen many examples of this when you are asked how did you hear about the company. Ask each and every of your new customers how they found you.
3. Use different phone numbers
If you generate leads by using call center you can use different phone numbers for different marketing campaigns or promotional channels. You can also use professional call tracking services to do this for you.
4. Use coupon codes and promotional codes
You can even further segment the sources of your lead generation by using unique coupon codes and promotional codes. Motivate new prospects and customers to use promotional codes when they call or visit your company for the first time – variety of special deals and promotions can be used to make sure they use the codes.
5. Use online tracking tools
If you generate leads online there are many ways and tools that let you track your clicks anywhere online. You can use unique URLs for different campaigns and in addition most URL shortening services provide tracking as well. You can even use different services for different campaigns and marketing channels.
6. Use website tracking tools
There are many applications like Google Analytics which give you information about your website traffic and visitors. Setup different conversion tracking systems to track, measure and compare different lead generation sources.
If you are able to create your tracking system you’ll be able to measure your marketing ROI at the overall level as well as track different marketing campaigns and initiatives.
Once you develop your marketing system setup good marketing reporting practices by defining your marketing KPIs and metrics and develop the habit of continuous reporting and analysis.
This simple and powerful approach to marketing analysis and reporting can make huge difference in your marketing and sales success and help you develop an ongoing improvement plan to grow your business and improve profitability.