Why understanding your marketing ROI is important
Return on investment (ROI) is a key metric for marketing. Defined as a measurement tool that helps you to maximise investments, refine campaigns, improve profitability and connect with customers, marketing ROI is a metric by which you can accurately assess the financial value of your campaigns.
You want any investment into your brand to meet objectives and demonstrate clear value. Procurement and Finance will want regular proof that your marketing budget is focused on producing results.
An often overlooked element of marketing ROI, is your agency spend and performance. The focus tends to be only on the campaign ROI. But, you need to understand if the budget allocated to agency spend is also producing results.
Marketing ROI is the most effective route to securing marketing budgets and that efforts are moving in the right direction. It is important as an ongoing measurement of marketing and procurement’s results and enables you to make incremental and relevant adjustments to the campaigns, but also to your internal processes.
Marketing ROI isn’t that elusive
You can use your Marketing ROI to measure a variety of key factors. The following are some of the most important, but this list is by no means exhaustive – you can add in your own metrics and balance your own marketing ROI measurements based on your own unique requirements and market expectations:
You can use marketing ROI to:
- Measure the profitability of your marketing efforts against spend factors such as agency costs, staffing and deliverables.
- Measure the financial value of your campaigns against customer engagement, strategic objectives, yield, market growth and sales.
- Gain visibility into your marketing spend to inform future strategy effectiveness and efficiencies..
- Refine and realign campaigns based on how well they are performing across specific channels, as well as against Benchmarks
- Manage resource allocation and spend based on data-driven decisions..
There are several formulas for calculating ROI but these don’t show the full picture. Marketing is a complex process that can’t be distilled down into a few numbers. However, there are two common methodologies you can use:
Net profit / loss – divided by – total marketing spend x multiply by 100 = percentage result.
Specific, Measurable, Achievable, Relevant and Time-Bound (SMART) – a framework that assesses your marketing ROI across multiple layers and helps you to put clear metrics in place that allow you to determine your success across clearly defined goals.
The problem is, it doesn’t really factor in the multiple external elements that impact a campaign. This makes it key to look at marketing ROI more holistically.
And this is where technology comes in. You need to implement smart solutions that are designed to help you benchmark multiple campaign variables that are traditionally considered too vague and complex to provide you with a clear ROI.
RightSpend: designed to deliver advanced marketing ROI
RightSpend gives you the ability to benchmark multiple areas of your marketing spend. Helping you to determine where you may be overpaying, where costs can be streamlined, and where budgets can be refined to further minimise unnecessary costs.
You can then use the savings and efficiencies to funnel your marketing spend into fresh campaigns and new markets that further enhance your marketing ROI and brand visibility.
You can use the RightSpend platform to assess anything from agency engagement through to staffing and asset deliverables, and to gain essential clarity into your marketing costs versus your deliverables. Hard data makes it easy for you to determine your marketing ROI and make informed decisions moving forward. The cost function in RightSpend allows you to plan your marketing budget more effectively, and ensure that Finance are on the same page as Marketing & Procurement.
RightSpend delivers its own ROI based on how much the platform can help you save on unnecessary spend and campaign improvements. Clients report that RightSpend pays for itself within the first month.
Marketing ROI is here to stay
Marketing will always need detailed budgets. Your team will always have to juggle costs versus campaigns versus expectations. So, it makes sense to use data-driven insights to fully realise the potential of your marketing spend and to work with agencies to deliver truly impactful results and advanced ROI. And, you can use this information to:
- Demonstrate the value of your campaigns, investments, agencies and markets with clear ROI and metrics.
- Increase marketing budgets based on performance and results.
- Improve marketing planning and marketing budget management within your teams based on insights into agency performance, ROI and more.
- Have a realistic view of Marketing ROI that will inform further planning and spend.
You can find out more about how RightSpend supports your marketing ROI by booking a demo with the team.
What is marketing ROI?
Marketing ROI provides marketing, procurement and finance teams with clear metrics around which you can measure the financial value and returns of your campaigns and marketing activity. These metrics include anything from agency costs to staffing, strategic objectives, market growth, sales and more. It allows you to better refine individual campaigns and strategies and ensure ongoing gains across these metrics while providing decision-makers across finance and procurement with tangible proof of your investment success.
How do you calculate marketing ROI?
There are two trusted formulas for this:
- Specific, Measurable, Achievable, Relevant and Time-Bound (SMART)
- [((number of leads x lead-to-customer rate x average sales price) – cost or ad spend) ÷ cost or ad spend] x 100.
Is my marketing working?
Your Marketing ROI and supporting data paints a picture of your marketing spend versus your success based on the metrics you’ve used. However, you need to constantly adapt, refine, adjust and measure your campaigns, channels, the agencies you use and your marketing spend to ensure you are always optimising your marketing plans.