Marketing and ROI

[KristineS]

When you purchase advertising or do other kinds of marketing do you calculate your return on investment? What is the point where you consider a marketing project to be a success or a failure in terms of ROI?

[SteveC]

We monitor all of our customers and leads... when considering if advertising is a success we simply work out if we have covered our costs and made money on the campaign... if we have we continue to advertise via this route and continue to monitor.

To give you an example with Google Adwords I know from experience that I have to spend around $300 to $400 on average to gain one new customer... which makes this somewhat effective...

[Steve B]

I consider break-even a success. If I break-even, then at least I am adding another satisfied customer or two that might refer me another client in the future. Plus, there is always an element that you will never be able to measure. For instance, I now have people telling me they see my advertising "everywhere" and finally decided to call for whatever reason (i.e. dog got out again). It gets harder to measure the ROI as more elements of a marketing campaign start overlapping.

[theGypsy]

When we look at 'break even point' there is also the cost of not only the advertising channel, but the associated admin costs, development costs etc.. that need to be factored in beyond the mere cash outlay of the campaign.

So... if we're looking good and the associated costs still leave us showing a profit, then it is generally successful....

Beyond that, if one is also purchasing the space for not only conversions but visibility (branding) then one might look at merely breaking even/minimal loss on a campaign...

I guess it varies ultimately on the goals of the particular campaign and associated benefits.

[Ad-Vice_Man]

It does get difficult/near impossible to measure the ROI of any particular part of the total campaign. It's like saying whats the value of any one gear in your watch. However, measuring a campaign's success can be easily calculated.

Just take the difference between gross sales from last year and this and divide it by the difference between your advertising expenditure from this year and last and you'll have your ROI per $ spent!

[orion_joel]

This seems to be an area that has a very vast ways of measure and check.

My marketing has at best been haphazard, some adwords campaigns here, flyers there, maybe a few direct mailouts. End of the day i have maybe spent $500 - $1000 on marketing. As it stands i could probably go back though the records find the clients that came from which campaign and work out how that converts to ROI. However it shows little point because things move fast i have different websites in place, and different products i prefer to promote, so the ROI is not going to be replicated easily.

If i was to just lump everything together and go i spent $500-$1000 on marketing in the 6 years my business has operated and generated $200K+ in profit in that same time the ROI is literally amazing, however 95% of my sales came from clients who never saw one bit of marketing from me.

I think the key to truly working ROI if you seriously want to know what it is, beyond just we made a profit or we broke even is to generate marketing that is easily track able to the results. There are many things that can be done to do this. For example there is one company in Brisbane Australia everytime you hear a new ad for their business, they have a different 1300 number, what better way to track which ad generates more leads but actually converts more sales.

If you do print advertising in a number of different publications, you need to find someway to differentiate the ads, if it is purely to promote your business, then there is the chance the ads all look alike, but how do you know which converts better to know if you are spending money on a publications which does not give any return. Either you can go with the above idea of a different phone number for each publications, which may add a little cost, however it can easily be tracked, and may save you more then it costs if you find you are getting no leads at all from one publication. Your other option is to look to promote something slightly different in each publications which you can track by the enquires you receive in relation to what was advertised.

While marketing can be a science, it will often come down to guess check and repeat, until you find the correct formula, their are very few people that can hit the winner first time every time and for every market.

[Steve B]

"Just take the difference between gross sales from last year and this and divide it by the difference between your advertising expenditure from this year and last and you'll have your ROI per $ spent!"

Maybe the above calculation gives you a textbook ROI figure, but it is likely completely meaningless. It ignores too many variables that would have to be removed in order to truly understand the success or failure of a campaign. Other variables that could make that calculation meaningless include: the state of the economy, changes in personnel, addition or subtraction of competitors, new product introductions either by you or your competition, the lingering influences of previous marketing campaigns etc. Even just the fact that you are in business another year influences things as your name recognition increases in the marketplace.

[GreaterVisibility]

We get great ROI, but with a cleaning and a mobile auto detailing business, we may be different than most of you guys.

For our cleaning business, a simple free ad on craigslist or another local site has brought us business. If a customer has come across financial problems of their own and has to let us go because they can't afford the service any longer, we then put flyers out in the neighborhoods that we currently work in, and ask our current customers for referrals. So, there hasn't ever been much cost associated with marketing our cleaning business, and the return is great, as one job gained pays us on a weekly, biweekly, or monthly basis for years at times.

With our detailing business, the free ads on craigslist and another local site get us nothing whatsoever. No response usually, and if we do get something it is a pure price shopper looking to get something for nothing. We do a Google Adwords campaign, and it brings us enough business on a part-time basis (we only detail when we have time, it is a great "filler" business) for no more than $100 a month to make it extremely worthwhile.

So, sometimes what works for one service doesn't work for another. We've always managed to keep our marketing costs low though, usually pretty much free.

[theGypsy]

"Just take the difference between gross sales from last year and this and divide it by the difference between your advertising expenditure from this year and last and you'll have your ROI per $ spent!"

Maybe the above calculation gives you a textbook ROI figure, but it is likely completely meaningless. It ignores too many variables that would have to be removed in order to truly understand the success or failure of a campaign. Other variables that could make that calculation meaningless include: the state of the economy, changes in personnel, addition or subtraction of competitors, new product introductions either by you or your competition, the lingering influences of previous marketing campaigns etc. Even just the fact that you are in business another year influences things as your name recognition increases in the marketplace.

I have to agree with ya there... that's why I prefer a campaign by campaign, medium by medium measurements... and once again, that doesn't include actions geared towards branding elements.... which are historically difficult to measure on a good day.

Ultimately though, I want to know how each campaign performs and each medium to adapt future plans.

[Ad-Vice_Man]

"Just take the difference between gross sales from last year and this and divide it by the difference between your advertising expenditure from this year and last and you'll have your ROI per $ spent!"

Maybe the above calculation gives you a textbook ROI figure, but it is likely completely meaningless. It ignores too many variables that would have to be removed in order to truly understand the success or failure of a campaign. Other variables that could make that calculation meaningless include: the state of the economy, changes in personnel, addition or subtraction of competitors, new product introductions either by you or your competition, the lingering influences of previous marketing campaigns etc. Even just the fact that you are in business another year influences things as your name recognition increases in the marketplace.

I get what you're saying... I do. But you're missing the point. Everything you do is part of your marketing. Every hand you shake every product decision you make, how you respond to the state of the economy and yes the marketing you've done in years past have all had in impact on today. That's why good businesses show a better ROI year after year on the money they invest. Any advertising professional will tell you that your advertising works better the longer you do it. This is why. the effects build up on themselves.

Like I said before you can't look at just one indidual cog's performance, if you have a high functioning mechanism... taking one of the cogs out may save you money on "cog maintenance" but it will affect the rest of the machine.

Now... this is of course assuming that you're marketing is working at all... If the clock is broken (so to speak) then repair may well be necessary.