Marketing ROI

Quick Summary
The old saying goes something like this. A business owner complains, “I know I’m wasting half my money on advertising. The only problem is I don’t know which half.”
But that’s from the days of “old-school” marketing, when there were few metrics for evaluating the performance of marketing initiatives.
Today, with new technologies, more media opportunities, and more precise ways to target specific audiences, marketing executives now have an array of metrics for measuring overall marketing efficiency and the performance of specific campaigns at a highly granular level.
Although these new tools and techniques certainly add complexity to evaluating marketing performance, measuring your return on investment (ROI) – and zeroing in on what works and what doesn’t – has become essential to competing in today’s marketplace.

Marketing Success Metrics

How do you evaluate your marketing campaigns if you don’t know exactly what to measure? The media you use, your sales process, your marketing objectives, your budget, and the tools available for tracking key data points will help you decide which metrics are most important to assessing your performance. More importantly, they can help show you how you can improve results.

Measuring Impressions

One of the most basic metrics for marketing is impressions – how many people see your ad or website. More impressions should lead to more leads and more sales. For traditional print media, impressions are based on circulation, or the number of direct mail pieces you send. For online promotions, impressions represent the number of page views to your website or the number of people who see your online ad.

Measuring Conversion Rates

Does your advertising campaign encourage a prospect to take action? It should if you want to measure conversion rates. This action can be as simple as clicking a link to learn more about your company or products, subscribing to a free newsletter, downloading a white paper, or even making an initial purchase. Your conversion rate represents the ratio of how many prospects take action to the number of impressions you get from your advertising.

Measuring Lead Generation

Sometimes customers simply buy your products or services. In other cases, you’ll need to generate leads and then engage them through follow-up to convert leads to sales. This is especially important for complex sales where products may be expensive and where a salesperson is essential to “closing the deal.” Measuring lead generation helps you see how many prospects convert into leads and ultimately how many actually make a purchase.

Measuring ROI

For each dollar you spend on advertising, how much money does your company make? That’s your return on investment (ROI). After you’ve measured impressions, assessed conversion rates, learned how many conversions resulted in sales, and determined the profits from each sale, you can calculate this critical metric. In some cases, however, it’s not your initial ROI that counts, but the returns you might expect from future sales.

What Is Return on Engagement?

Now, many marketing executives are not only measuring ROI, but also ROE, or return on engagement. As you engage with customers, prospects, and the public at large through social media, you’ll want to understand the returns you might expect from these engagement strategies. These metrics can include the number of times your brand is mentioned on Twitter, your Facebook “likes” or even comments on your blog. As you engage in these new media, you can begin to get a sense of how these activities contribute to sales and profits.
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