How To Measure ROI On Marketing

When you’re in business, every dollar counts. If you spend money on something, you expect to get a Return On Investment (ROI), right? Whether it's spending money on a contractor, technology, a strategy session, or an advertising campaign.

In this article, we’re going to dive into marketing specifically, looking at what good ROI on your marketing looks like, how to calculate your marketing ROI, and how you can improve on it too.

If you want to take your learning further, click through to our marketing course page and see more about how we can help your business with our marketing training.

What's the importance of measuring ROI on marketing?

Organisations, small businesses, sole traders, all need to market themselves, to let the world know of the products and services being offered. You do not want to just spend money on marketing without tracking it because then you don't know what's working and how you can improve on the marketing efforts you're currently doing.

Businesses exist through positive cash flow and if you’re spending money on marketing, you need to know that you’re getting a positive return as a result of that marketing.

When you measure the ROI of your marketing, if it's a negative result, this can help you reconsider what you're currently doing. If it's positive, you can put more money towards it. By measuring your ROI on your marketing, you’ll be able to know everything from which marketing channels are working to what audiences engage the most with your content to what specific types of content sells you and your business better.

This is why it's so important to measure and track your marketing ROI, both positive and negative.

How to calculate ROI on marketing

So, how do you calculate your ROI on your marketing?

There is a simple formula you can use:

1. Take away the $ amount you have invested from the total revenue amount.
2. Divide this number by the total amount of money you invested.
3. Multiply that number by 100 and you will have your ROI as a percentage.

There are many other ways to calculate your ROI, and not all of them will involve a dollar sign.

For example, if you have a Social Media marketing goal of gaining 1000 followers to your Instagram account, and you invest $300 to do so, if you get 2000 followers, this would be a 200% ROI. You gained twice as many followers for the money you invested.

What other goals can you measure for when investing in marketing?

• Website traffic
• Leads generated
• Increase in engagement rate
• Increase in community growth 
• And much more.

Sometimes the return on your investment won't be only monetary, but it still can, and should be, measured and reported on.

What is a good ROI on marketing?

Some people might say that any result in the positive is a good ROI. However, if you’re wanting to grow your business and be more profitable, you need to be more specific with a plan for results.

According to industry, a ratio of 5:! Is a good ROI, that is a $5 return on every $1 you spend. An exceptional ROI is 10:1, and anything less than 2:1 is considered not profitable (data thanks to Bannerflow). However, it will always depend on what specifically you're measuring - is it your CPL (Cost-Per-Lead), CPA (Cost-Per-Acquisition), social followers, or something else?

No matter what you’re measuring, as long as you’re measuring it, you can take that data and use it as a benchmark for future activities and campaigns. Whether that's through, for example, how many people you get to sign up for a workshop, or how many people you convert in that workshop, or both! It's all about seeing what areas you can improve on based on the numbers.

How can you improve your marketing ROI?

If you’re not happy with the current ROI of your marketing activities, what things can you do to improve them?

Evaluate your current spending

Are you spending too much money on marketing and not getting any returns? Can you get similar results with a lower spend? Are there cheaper alternatives to what you're currently doing? Should you spend time optimising what you’re doing? How can you implement further efficiencies?

Could your budget be better spent outsourcing some of these tasks? Or are there new channels you haven't explored yet that could provide a better ROI?

Evaluating your spending doesn't always mean finding ways to spend less. It can mean spending more, in a better way.

Cut down on spending for channels with low ROI

You should always be measuring and reporting on your marketing activities, even if they go badly. Knowing what doesn’t work means you can stop throwing money down that particular drain.

If a marketing channel doesn't stack up to your goals, and you’re getting a negative ROI no matter how much you optimise it, it may be time to change to try something else.

Consider new marketing channels (social media, SEO, etc.)

There are many kinds of marketing channels out there. Have you tried Google Ads and it hasn't worked? Switch to Facebook Ads or even marketing on LinkedIn? How about a good old-fashioned letterbox drop? Or marketing on the radio? It's about testing, diversifying, and optimising to where your audience is and what they like to use and engage with.

Key takeaways

When marketing your business you want positive returns on your investment. What that return is, be it money, followers, subscribers, or whatever else, there are always ways you can measure and report and find these things out.

Don't be discouraged if the returns are minimal, or negative, it just means you reset and do it again until you hit that sweet spot.

Need more help with your marketing? Let us show you different ways to promote, measure, pivot, and optimise your business's marketing efforts with our marketing training and coaching at The Entourage today.