When it comes to marketing, all companies want the answer to one simple question: Is my marketing program producing a return on investment (ROI)? Or more simply put: Is this worth my money?

You need to have at least some level of understanding about how the numbers add up, both before and after you invest in any marketing campaign. Any form of advertising or marketing is only as good as the results that it produces, so companies need to know that their campaigns are producing the kind of results that are worth a continued investment.

There is one basic formula that is used to determine ROI for marketing, although many variations of it may apply depending upon your industry, product, how you measure profits and several other factors. Marketing ROI is usually calculated and expressed as a percentage using the following formula:

(Return – Investment) / Investment = ROI

In other words, the return produced by your marketing efforts minus how much you invested divided by how much you invested. For example, let’s say you invested $200 in a marketing campaign that produced a return of $1,000. Applying the formula from above:

(1,000 – 200) / 200 = 4

Since ROI is expressed as a percentage, you would multiply the final result by 100, giving you a total ROI of 400%. Obviously, this is would have been a wildly successful campaign, and you could increase your investment from that point.

However, it is important that you understand that it will not always be this simple to tell if your marketing efforts have produced the desired results. There are several factors which one must consider such as:

  • How do you determine your return? Is it from total sales dollars, leads generated, gross profit, net profit or some other metric?
  • How often should you measure your ROI? Some marketing campaigns are expected to produce results in one month; others produce results in one year. You need to know when to measure in order to get an accurate picture of ROI.
  • Are you taking all costs into account with your investment or only direct dollars invested? You may also need to consider creative costs, printing costs, management time, technical costs and others.

In order to truly understand whether your marketing efforts are being successful, you have to make sure that you are measuring ROI properly. Make sure to measure each area of your marketing individually to know which are successful enough to increase your investments and which should be reduced. For instance, you may be having success with the investment in content marketing but not as much in radio commercials. Measure your ROI on each campaign individually to get a better understanding of the whole of your marketing efforts.

Want to learn more about how to increase your ROI? Contact us at Grow Digital Marketing, our team of experts will be able to help.