Marketing ROI: Make Sure Your Marketing is Making Money
Marketing ROI: Make Sure Your Marketing is Making Money
Upon first blush, this looks rather simple. Just take the total cost of your campaign, track it through to conversion and determine that the revenue generated is greater than the expense. However, most people make the mistake of assuming that calculating ROI is only involves direct expenses and revenue. There are other factors to consider when determining your return on investment.
In a moment, I’ll show you a quick formula to help calculate ROI, but before I do, let me explain the types of expenses you need to consider:
Direct Expenses. Any cash outlay you have to develop, create, and distribute your marketing campaign is considered a direct expense. For example, if you’re doing a direct marketing campaign, you’ll have to print your mailer, pay for postage, and offer an incentive. All of these factors are direct expenses because they cost you money.
If you’re marketing online with Google Adwords or a similar type of service, you’re paying for each and every click – this is considered a direct expense.
Indirect Expenses. An indirect expense is something you spend to in conjunction with your marketing efforts but doesn’t necessarily involve a cash outlay. For example, if you pay a copywriter or designer to help with your creative, their time and expense must be considered. Other indirect expenses might include your overhead such as rent, electric, phone, insurance, etc.
Now that we’ve identified some of your expenses associated with an ROI calculation, lets look at a specific campaign example and how we can determine our return on investment in a simple manner.
Example1: MarketingScoop, LLC decides to send a post card mailing to a list of small businesses promoting their directory service listing. Here is a list of expenses associated with the mailing:
Direct Expenses
Post card design $100
1,000 post cards $200
Postage $500
Total $800
Indirect Expenses
Indirect Expenses X .25* $200
A rule of thumb you can use to calculate your indirect expenses is to multiply your direct expenses by 25%. If you want a more exact determinant of indirect expense, you will have to record the amount of time attributed to this particular marketing project as a percentage of your annual ‘available working hours’. Then, multiply this percentage against your total business expense.
Based on our calculation above, total campaign cost equals $1,000. For this example, let’s assume that the campaign brings in $2,500 in revenue. Simply divide revenue by expense ($2,500/$1,000) to determine ROI. In this example, our ROI was 2.5.
Note: This is a Gross calculation which means that we have not subtracted any product related expenses. This gets into Net Income, EBITDA, and other stuff for the accounting team to figure out.
The key is to use this information as a benchmark for future campaigns. Instead of assuming that a marketing campaign is productive, you now have a basic measurement to evaluate it and compare future campaigns.
About the Author:
Michael Fleischner is an Internet marketing expert with more than 12 years of Internet marketing experience. Visit the Marketing Blog to learn more.
Marketing ROI Make Sure Your Marketing is Making Money - To learn more about this author, visit Michael Fleischner's Website.
Like this article? Share it with your friends
Today, if you ask any marketer what his biggest challenges are you will no doubt here Return on Investment (ROI) at the top of their list. With competitive pressures, businesses more focused on profitable growth, and an increased need to do more with less, marketing professionals need to generate favorable returns on most – if not all of their marketing campaigns.
Upon first blush, this looks rather simple. Just take the total cost of your campaign, track it through to conversion and determine that the revenue generated is greater than the expense. However, most people make the mistake of assuming that calculating ROI is only involves direct expenses and revenue. There are other factors to consider when determining your return on investment.
In a moment, I’ll show you a quick formula to help calculate ROI, but before I do, let me explain the types of expenses you need to consider:
Direct Expenses. Any cash outlay you have to develop, create, and distribute your marketing campaign is considered a direct expense. For example, if you’re doing a direct marketing campaign, you’ll have to print your mailer, pay for postage, and offer an incentive. All of these factors are direct expenses because they cost you money.
If you’re marketing online with Google Adwords or a similar type of service, you’re paying for each and every click – this is considered a direct expense.
Indirect Expenses. An indirect expense is something you spend to in conjunction with your marketing efforts but doesn’t necessarily involve a cash outlay. For example, if you pay a copywriter or designer to help with your creative, their time and expense must be considered. Other indirect expenses might include your overhead such as rent, electric, phone, insurance, etc.
Now that we’ve identified some of your expenses associated with an ROI calculation, lets look at a specific campaign example and how we can determine our return on investment in a simple manner.
Example1: MarketingScoop, LLC decides to send a post card mailing to a list of small businesses promoting their directory service listing. Here is a list of expenses associated with the mailing:
Direct Expenses
Post card design $100
1,000 post cards $200
Postage $500
Total $800
Indirect Expenses
Indirect Expenses X .25* $200
A rule of thumb you can use to calculate your indirect expenses is to multiply your direct expenses by 25%. If you want a more exact determinant of indirect expense, you will have to record the amount of time attributed to this particular marketing project as a percentage of your annual ‘available working hours’. Then, multiply this percentage against your total business expense.
Based on our calculation above, total campaign cost equals $1,000. For this example, let’s assume that the campaign brings in $2,500 in revenue. Simply divide revenue by expense ($2,500/$1,000) to determine ROI. In this example, our ROI was 2.5.
Note: This is a Gross calculation which means that we have not subtracted any product related expenses. This gets into Net Income, EBITDA, and other stuff for the accounting team to figure out.
The key is to use this information as a benchmark for future campaigns. Instead of assuming that a marketing campaign is productive, you now have a basic measurement to evaluate it and compare future campaigns.
About the Author:
Michael Fleischner is an Internet marketing expert with more than 12 years of Internet marketing experience. Visit the Marketing Blog to learn more.
Marketing ROI Make Sure Your Marketing is Making Money - To learn more about this author, visit Michael Fleischner's Website.
Like this article? Share it with your friends
| |||
 |
No article feedback found. | ||
|
Leave Your Feedback | ||
|
|||
 How startup businesses sabotage their success
| |||
| I work with many startup companies and I see the mistakes they make that sabotage their businesses every single day. Here is a list of the top 5 mistakes... |
|||
|
Simple Top Home Internet Business Ideas
| |||
| There are so many different ways to make money at home on the Internet that it's often hard to get started. In this article let's see if we can narrow that down a little bit by listing the top 5 home Internet busine... |
|||
|
Slash Your Marketing Budget
| |||
 As CMO at Deloitte and then Starwood, I hated it when other marketers measured themselves by the size of their budgets. |
|||
|
Money Making Strategy: Make It Better!
| |||
| Making money can be as simple as making it better. Better product, better marketing and a better message. |
|||
|
It’s The Economy Stupid!...Again.
| |||
| Marketing campaigns are about one thing…creating a campaign that generates a direct response that you can test the result of and that, when tested, shows that you made money. When you have that type of marketing cam... |
|||
| |||
John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
|||
|
Joe Dager is President of Business901, a progressive coaching company providing no-nonsense direction in areas such as Lean marketing and organized referral marketing. What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe’s ability to combine his expertise with “out of the box” thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with.” - James R. If you want to learn more about Business901, start a conversation with us. We can be found @ Web/Blog: http://www.business901.com Web/Blog: http://www.FundingYourNonprofit.com http://www.linkedin.com/in/business901 – Linked In http://www.twitter.com/business901 – Twitter - Visit Joe Dager's Website |
|||
Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
|||
Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) Jay Kubassek is a Canadian born entrepreneur, internet marketing genius, professional speaker, international real estate developer/investor, executive film producer, extreme sport enthusiast and a passionate supporter of several charities worldwide. In 2007, Jay's vision and dedication to help other entrepreneurs and business owners duplicate his marketing success led to the creation of his fourth company CarbonCopyPRO, an internet marketing firm already worth over 15 million dollars that has over 20 employees and contract workers with clients is 12 different countries. Jay resides in NYC with his girlfriend Jamie, three year old son Milo and dog Cooper. As executive producer he recently premiered his first film in the 2008 Cannes Film Festival. As an adventurist he is racing the 2008 Baja 1000 off-road race and is a member of the 2008 U.S. National Elephant Polo Team, The New York Blue who will be representing the US in the 2008 World Championships in Nepal. Visit Jay's Blog: www.JayKubassek.com - Visit Jay Kubassek's Website |
|||
Michel NerayMichel Neray has over 25 years of experience as an award-winning copywriter, an Internet pioneer, a tradeshow pitchman and a senior sales and marketing executive. An online pioneer, he was one of the first marketing professionals to embrace the Internet by building websites as early as 1993. In 1994, Michel co-authored a book entitled "The Great Crossover: Personal Confidence in the Age of the Microchip", which made it to Jack Canfield's Achiever's Recommended Reading List. Michel founded Portfolios.com in 1995, the world's first online source directory for creative professionals and one of the first websites based on community generated content. Since creating The Essential Message in 2003, Michel has helped thousands of independent professionals and entrepreneurs as well as growing corporations find a better way to differentiate, position and brand themselves. In 2005, his chapter "Everything Starts With A Conversation" was selected as the lead for the book, "Sales Gurus Speak Out" and re-published in 2008 for 'Awakening The Workplace Volume 3'. He is also a co-author of "In the Company of Leaders" (2008) with 40 top North American leadership experts. - Visit Michel Neray's Website |
|||
Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
|||
Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
|||
Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
 Michael Fleischner (Visit Michael's Website) Michael Fleischner is an Inter net Marketing Expert with more than 12 years of marketing experience. He has appeared on The TODAY Show, Bloomberg Radio, and other Major media. You can learn more about Michaels SEO experience by reading the Marketing Blog or by picking up his tell guide on how to improve search engine ranking at http://www.webmastersbookofsecrets.com
|  |
 |
|
|
 |
|
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
 |
 | ||
 |
||
 |
||
 |
||
|
| ||
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 |
 Manage, Click, Learn. 2009 Biography How To Double Your Business CAN-Spam Checklist English |
|
 | ||
 |
Top 50 Blogs For Startups
Top Blogs To Watch In 2008 | |
 |
Top 50 Political Blogs
Top Political Blogs of 2008 | |
| ||
 |
|
|
|
|
|||||||||||||||||||||
 |
|
|
||||||||||||
