It is common for clients to question you about the benefits they will receive when working with or investing in your company. Whenever you strike up a deal with any customer, their interest is often in the potential return on investment (ROI).
This interest is a good trait for potential customers to have since clients who ask these questions are serious about working with you. Moreover, once you have shown them your proven results, they are bound to stick around.
If you do not have any data, you can never be sure whether your campaign will work or not. You need to have some solid data so that you know which areas require more money to achieve ROI in marketing.
There are different ways to calculate marketing ROI, and whichever method you choose depends on what type of business you own and your personal preference.
The easiest way to calculate marketing ROI is by using the following formula:
By using this formula, you will be able to calculate your ROI percentage. Plug the figures for sale production and money invested into this formula.
The ultimate goal of ROI is to receive more money than you initially invested.
Now the above formula is best suited for businesses that sell one-time services and products. However, if your business is based on recurring sales, then the above formula might not be the right one for you.
For businesses that revolve around recurring sales, the best method for calculating marketing ROI would be the Customer Lifetime Value Formula instead.
This formula has many versions; however, this one is the simplest. To calculate marketing ROI for this kind of business, you can use the following formula:
So, if you are running a business and your average consumer is subscribed for a total of 18 months, and you know the amount of average revenue that you generate per customer, you will just multiply the two to achieve your average customer lifetime value.
You will then find out the average cost of each of your customers and will then be able to calculate marketing return on investment using this formula.
If you do not measure your performance correctly, you will not be able to find the exact ROI. To make accurate calculations of ROI, you need to track and measure everything as accurately as possible!
Businesses need to understand that customer retention is essential to get the most from your return on investment. You also need to focus on customer acquisition as well. This number will help to increase the customer lifetime value for your company.
How to calculate marketing ROI
Google Analytics is a powerful tool that can help your business determine ROI. With this tool, you can find:
If you are looking for an alternative to Google Analytics, Hubspot Analytics is a great tool as well. However, if you want to attain the best results, use them both simultaneously.
Looking to increase your ROI? Contact Edkent Media to book a free consultation and see how digital marketing can increase your company’s growth and sales.
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