What do you think is the best strategy to sell more with Digital Marketing:
- Invest in campaigns on Instagram Ads or Google Ads?
- Or create a blog article optimized to appear on Google and other search engines?
The correct answer to this question is that it depends:
- The financial objectives of your business;
- The type of audience you want to reach with Digital Marketing;
- The product or service you are offering;
- And, mainly, the proportion of investments compared to results!
It is to clarify which is the best sales strategy for your business that I, Rodolfo Benetti, decided to create this tutorial in which you will learn:
- What is Marketing ROI;
- How to calculate your Return on Investment;
- And how to find out which is the best Paid Media channel for your company’s profit plans!
The Importance of Marketing ROI
From the English ” Return On Investment “, ROI is the acronym adopted in Digital Marketing around the world to illustrate how much your company is profiting from the investments it makes — your Return On Investment!
Marketing ROI is one of the most important indicators to inform your company about the health of its actions and the potential to extract money from them by selling more (and better) to the ideal audience!
It is from the ROI that you will know when an action is worth maintaining (or expanding to reach more people) or when a redirection of funds or a new strategic plan is not only necessary, but urgent!
This targeting is so crucial that the slightest miscalculation can cause your company to waste resources and manpower on campaigns that only appear to perform well, at the expense of campaigns that could be better optimized to help the client achieve success alongside your company.
This dynamism of knowing the ideal audience and not just trying to sell to them, but educating them and accompanying them on their growth journey, is what I and other Marketing professionals call Customer Success — and this is one of the pillars that support our work here at Enjoy Minder!
It means that a successful campaign (capable of increasing ROI) aims not only to try to convince a potential customer to buy in a pure act of consumption, but mainly:
- Understand the problems he faces (and show that your company understands this challenge);
- Show a solution (through your culture and your products or your services);
- And make sure your business is available to educate them about the problem (and the potential for success through the solutions you offer) throughout their awareness of the challenges, the victories, and your brand!
Only by understanding this will you be able to create increasingly better Internet sales strategies, making the most of your investments in content through Digital Marketing — considerably increasing your ROI because of this!
How to correctly calculate Marketing ROI
There is no mystery to learning how to correctly calculate Marketing ROI, simply:
- Add up the investments made in an action or campaign (such as your team’s salary, the purchase of programs or the promotion of ads, for example);
- Identify how much these expenses generated directly and indirectly in sales;
- Subtract the profit generated by the campaign from the total investments;
- Take this result and divide it again by the total expenses;
- Then find the ROI percentage by multiplying the previous number by 100!
Before explaining with clear examples how this process works, I think it’s easier to show you the ROI calculation formula in the order I listed above — look here:
ROI = [ (return – investment) ÷ investment ] x 100
Since Marketing ROI is a dynamic metric, it needs to be evaluated periodically over time to ensure accurate results are being analyzed.
Additionally, correctly assigning each sales group to each campaign also ensures that you are not calculating ROI with the wrong information — which can be fatal!
“Campaign” is the name given to groups of ads grouped under the same strategy (with a single objective and goals) usually executed in parallel for a certain period of time or budget.
So, being careful about including unreliable data (or ads that don’t belong to the campaign you’re trying to identify ROI for) prevents you from calculating the returns of an average or poor campaign as extraordinary.
It also reduces the chances of undervaluing a campaign that actually performed very well — and that can be reproduced and optimized later to generate even greater returns!
Identify data sources
To avoid misinterpretations, the first step in calculating Marketing ROI is to gather data relevant to the actions being examined.
This task is simple, since, for example, your advertising platform (or your partner agency, or even your Digital Marketing automation tool) will gather on a dedicated page all the information related to each of your campaigns!
Important data typically gathered before calculating Marketing ROI includes:
- The number of clicks on ads;
- The number of impressions (views) on advertisements;
- The conversion rate of each advertising format in the campaign;
- And the number of completed sales!
I recommend that at this stage you also retrieve parallel sales information (which will not be used exactly to calculate ROI, but which will provide valuable clues for building your next campaigns and increasing your conversion rates), such as:
- Buyers’ feedback;
- Customer demographics (gender, age, region, and the like);
- And market research (demand, competition, viability and so on)!
Use data analysis tools
With all the important and parallel information gathered in a report (which you can export directly from your platform or create manually in a text document), you will have to enter it into a data analysis tool!
Again, Internet advertising platforms and Digital Marketing automation tools are capable of generating comparisons and importing this data in seconds — but in addition to these platforms, it is also possible to use:
- Exclusive platforms for data analysis;
- Customer relationship management systems (called CRM );
- And tools designed to monitor advertising campaigns on social networks, or paid ads on search engines and third-party channels (such as blogs or videos)!
Calculate ROI across different channels
Speaking of different channels, just by looking at the data gathered it will be obvious that the public does not behave in the same way across the Internet: each type of media, on each type of platform, will trigger a different type of reaction from the audience!
To accurately calculate your Marketing ROI (since making mistakes at this stage can generate false results, which is not good at all), find your investments and returns by channel, such as:
- In Google Ads campaigns ;
- In advertisements published on each social network, separately;
- In automated flows of E-mail Marketing messages;
- And even for your traffic generated organically with Content Marketing and SEO !
You also need to take into account that, during the period of a year, the market goes through periods of more and less sales based on seasonal cycles, as in the case:
- From the sales cycles of your own company or ideal audience;
- Commemorative dates in the region where your campaigns are broadcast;
- Factors specific to your industry and niche (such as strikes or relevant trends);
- And the influence of public opinion or the global press when related to the theme of their actions or the type of offer being presented by them!
When I said that Marketing ROI was a dynamic metric, I wasn’t kidding!
However, even with these variations, you will notice that after your first calculations you will be able to see patterns and interpret the data in a much more harmonious way!
The only way to learn is by doing — and that’s exactly what I’ll teach you to accomplish in the next step!
“I launched my campaign, now what?”
Let’s say you and I created a fictitious marketing campaign that cost $5,000 and generated $20,000 in revenue.
To calculate the ROI for this campaign specifically, we would use the formula I presented in the previous section:
ROI = [ (return – investment) ÷ investment ] x 100
In which the order of the factors greatly influences the result , being essential:
- First, subtract the total investment costs from the return generated;
- Then take this result and divide it by the investment (the same number used in the previous subtraction);
- And then multiply that result by 100 to find the percentage.
The numbers for our campaign in practice, following the formula step by step, would be:
ROI = [ (20,000 – 5,000) ÷ 5,000 ] x 100
First : 20,000 – 5,000 = 15,000
Then : 15,000 ÷ 5,000 = 3
Last : 3 x 100 = 300
Our campaign’s Marketing ROI ( i.e. our Return on Investment) was 300% — a fantastic number for our first partnership, don’t you agree?
I told you calculating ROI was easy!
In fact, Return on Advertising Investment is often referred to as ROAS. Learn more by accessing our other content below!
Calculate the revenue generated by the campaign
All the money your actions generate through sales needs to be attributed to the right channel (the one for which the Marketing ROI is currently being calculated)!
This step becomes easier to carry out if you keep all your sales already organized in automated collection processes (and generally planned by your Digital Marketing team, or by your partner agency, even before your sales strategy is put into practice).
It’s important to note that direct sales (those that typically convert directly from an ad click to a purchase, for example) tend to come to mind when people talk about revenue.
But I recommend that you also take into account indirect sales: those that were the direct result of your Marketing action, but that were not actually born from the conversion of a click!
Perhaps the customer was interested, explored your content, and had questions answered by your sales team, before deciding to close the deal!
Just make sure that all revenue (direct or indirect) relates to the results of the campaign for which ROI is being calculated.
Calculate the total cost of the campaign
It’s crucial that you consider all the costs and investments needed to calculate the true ROI of your strategy — no matter how small they may be!
I didn’t forget to include:
- How much it cost to produce the visual media (from graphic design to video production, if applicable);
- How much did it cost to create the texts and all the complementary content;
- How much did it cost to rent or buy software to manipulate, optimize or organize content and advertisements;
- And the Marketing tools themselves , of course!
As the CEO here at Enjoy Minder, Gaurav Rajput (who is my partner in success) says: “if you care, it matters”!
So, be sure to add every penny to the total cost of your strategy, because they will make a difference in your company’s Marketing ROI!
Subtract the cost of the campaign from the revenue generated
With the total cost calculated, you can now evaluate the net profit obtained by the campaign!
To do this, subtract from the total cost the amount of revenue generated by sales in this campaign as a whole (across all communication channels and all media formats of your ads in this set).
Divide the result by the cost of the campaign and multiply by 100
Now, by dividing the result obtained in the previous step by the total cost of the campaign — and then multiplying this new result by 100 — you will transform this number into a percentage!
Using a percentage to talk about the results will make it easier for people involved in the process to interpret them (as it is a smaller number and indicates a proportion rather than a unit) and for comparison with other data or actions in different time periods!
Tips for Maximizing Marketing ROI
You’re reading this guide not only because you want to understand what Marketing ROI is, but also how to increase it to get the most out of your investment. Am I right?
To increase ROI, you need to:
- Interpret each campaign as a unique unit of measurement;
- Allocate the campaign budget intelligently;
- Identify and prioritize the channels with the highest performance;
- Adapt your strategies based on market changes and seasonality;
- Understand and segment your target audience very well;
- Personalize messages and offers to reach this audience with high relevance;
- Monitor campaign data in real time and periodically;
- And keep an eye on emerging trends so your ads can ride the crests of these waves!
Want a higher ROI on your Marketing campaigns?
Calculating your Marketing ROI the right way requires a lot of thought and a specific, non-opinionated approach.
After all, you are dealing with practical, factual data on how your target audience is interacting with your business’s offerings!
As simple as this calculation is, interpreting ROI (and preventing it from falling by making silly mistakes) requires continuous monitoring and a certain amount of accumulated experience — something that not every company has time to nurture in the search for greater results in less time!
That’s why I published this guide for you — so you could learn that:
- ROI is the acronym for Return on Investment;
- ROI is important to indicate how much profit your actions are making;
- To calculate ROI, you need to subtract the profits from the total costs of the action;
- And divide this result again by its total cost;
- Then turn it into a percentage by multiplying it by 100!
By following the tips I gave (and with a bit of boldness and patience), you can increase your ROI by learning in practice from your mistakes and successes!
If making mistakes is not a viable option for your company (either because your budget is limited or because you need immediate results), it is best to ask for help to avoid the pitfalls along the way and get on with what matters: making a profit!
Talk now to the team of experts here at Enjoy Minder and explain your needs!
My multidisciplinary team of strategists and I will put together a foolproof plan to meet your business needs — and we will put it all into action without leaving room for error!
