Does this look like your marketing budget?  A sampling of every media that’s practical with the associated costs.  What if I were to ask you which media is more effective per dollar spent?  Would you know?  Chances are you won’t.  But, wouldn’t it be great to know this?  Suppose I were to add a column:

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing ROI is the return on investment of your dollars spent.  Marketing ROI is calculated by dividing the revenue attributable to a marketing activity by the cost of that activity.  In the case of direct mail, $100 of revenue was created from each dollar spent on direct mail ($400,000 of revenue comes from direct mail activities).  So, what can you do with this information?  Well, if we rank the list by Marketing ROI, we see that the highest return on your marketing investment is from promotional items, and the lowest is from a billboard.  Using this information, we can redirect our marketing budget to the higher returning items.  Theoretically, if we invest the $3,500 from the billboard into promotional items, we could achieve an $525,000 in revenue versus $24,500 for the billboard, for an added $500,500.  Marketing ROI makes the choices clear as to where to spend your marketing dollars.

 

OK, that’s elementary math, but where do you get the numbers to make the calculations?  The cost figures are easy.  The hard part is the revenue numbers.  Tracking the revenue numbers after the fact is impossible.  You have to set up the measuring process from the start.

 

Tracking Revenue to Marketing Activities

Whether you have a sophisticated CRM system or keep track of leads on an Excel spreadsheet, tracking revenue to marketing activities is possible with a little foresight.  The first thing to do is keep track of your marketing activities.  This should be easy – everyone has a budget!  Just separate your expenditures by activity categories. 

 

The next part is a little trickier.  You have to keep track of leads generated by each activity.  Some tricks to do this: 

 

1) For each activity, incorporate a unique “landing pad” on your website.  For instance, if your website is www.mycompany.com, then on your two ads, have the prospect come to the page www.mycompany.com/ad1 and www.mycompany.com/ad2 for more information.  At that point, have them fill in information about their opportunity (name, company, needs, etc).  You now have a tracked lead and follow-up information for sales. 

 

2)  Another trick is to have a “promotional code” attached to the activity.  For instance, if you give away a keychain at a trade show, place a promotional code on the keychain – PC1001 – and then when the customer contacts your company, ask for the promotional code. 

 

Leads are one thing, but what about revenue?  Well, if the lead is established in a formal way, then you can track the closure of the leads to sales.  That customer’s revenue is then tied to the tracking number for the marketing activity.  The set up of the system to track is the hard part; after that, it’s not a significant amount of effort to request the information to track the information once the process is established.  As soon as you start tracking, based on the results after a couple months, you can begin making adjustments to your marketing mix. 

 

A note of caution:  Make sure you take into account your selling cycle when you begin measuring.  If it takes your customer typically keeps eight weeks of inventory in stock of your product, then measuring the effectiveness of your marketing efforts after two months is premature.

 

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