Marketing ROI

Calculating the return on your marketing investment begins by asking every person who inquires about your products or services one simple question. How did you hear about us? It may seem obvious, but in our experience many businesses don’t have an annual marketing budget, let alone processes in place to track inquiries, categorize lead sources, and quantify the effectiveness of advertising expenditures.

The bottom line when it comes to measuring return on investment is revenue so you have to start with sales numbers. If you’re not using a sophisticated sales automation service like salesforce.com or customer relationship management software, then a simple spreadsheet will do.

In addition to basic sales information like what was sold, when it was sold, to whom, and for how much, the next most important piece of information you need to track is the lead source. For many businesses, lead sources will include such things as client referrals, your company website, tradeshows, advertising, public relations, etc.

You should be able to easily calculate your total annual marketing investment in each category. The total cost of your company website, for example, will include the initial design build cost amortized of the lifespan of the website (however many years between major website overhauls), the annual cost of hosting your website, and any additional expenses related to website support and maintenance.

The total cost for tradeshows would include everything from the booth space, the lifetime cost of your exhibit amortized over the lifespan of the booth, as well as all the costs associated with the event; booth staff per diem, travel and housing, sales literature, giveaways, etc.

Similarly, the total cost of advertising must include both the media cost as well as the costs associated with developing an advertising campaign; strategic planning, copywriting, photography, design, etc.

Once you have real costs associated with each marketing category, and you start counting the lead sources associated with every sale, you will be well on your way towards making better decisions about your marketing expenditures.

Until next week,

Matthew Anderson, President
Milestone Marketing Associates, Inc.