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Marketing ROI: The Refresher You need

Tyler Holliday, Ytel |  
Looking for a refresher on calculating your marketing ROI and what exactly it all means? For the analytics nerds out there, this is the post for you. Any department that is running campaigns and spending company budget should be able to report on the value and success of each campaign. Learn more in this post!

Calculating your marketing ROI provides insight and benefit in the following ways:

- Justifies what you've spent and allocates those funds 
- Compare campaigns to discover what works for your business and what doesn't 
- Delivers accurate spend on customers, leads and sales
- Track and improve on previous campaigns 
- Solid data to support every investment made

The information needed to calculate ROI:
  • Cost of goods sold (COGS): The cost to produce a product or service.
  • Marketing investment: The cost of the media, production costs and time invested.
  • Revenue: It can be tricky to tie revenue to a particular campaign, especially when you run a variety of campaigns and have a long sales process. Your finance team may have some suggestions for estimating this figure.

The standard formula to calculate your Marketing ROI is:

Gross Profit – Marketing Investment 
__________________________________________
Marketing Investment


This number will provide valuable insight into where you should be focusing your energy, what investments or campaigns are working and which need modification. 

Set your marketing budget

When you have an ROI goal and an annual profit goal, calculate the amount of money you should spend on marketing  by solving the ROI formula for the “investment” figure. This simple equation has the power to tell you a lot about your upcoming marketing campaigns, and if your current budget is accurate. 

Bridge the Gap

Unfortunately, when revenue gets tight, the marketing budget is typically one of the first resources to get cut. This is never a great idea because marketing is the best way to bring in new business and upsell current customers. Being able to speak on your department's ROI will decrease the likelihood of budget cuts and bridge the gap between Marketing and other departments.

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About The Author

Tyler Holliday, Ytel

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Tyler is fueled by the power of imagination and has a passion for connecting businesses to their customers and prospects through authentic marketing. Some advice he gives to other marketers is keep things simple, and always follow the golden rule… Measure what you market.


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