ROI is a crucial indicator in marketing that measures your marketing initiatives' effectiveness and profitability. It measures the return on the resources such as production and promotion costs such as employee wages, platform expenses, and media spend you devote to various content marketing strategies. Put simply, ROI answers the fundamental question: “Is our marketing investment generating more revenue or value than it costs?”
How to calculate ROI in marketing:
((leads generated x lead-to-customer rate x average selling cost) - marketing cost) ÷ marketing cost] x 100.
You must be able to assign values to the below metrics to utilize the marketing ROI formula:
Leads generated: How many individuals became leads from your marketing campaign?
Lead-to-customer rate: What proportion of leads are converted to customers? For example, if 14 out of 100 leads became customers, your lead-to-customer rate would be 14% or 0.14.
Average selling cost: the average value of a product or service purchase.
Marketing cost: This includes all expenses for launching your marketing efforts. Your main cost factors here will include staff expenses, media spending, and all costs relating to content production, such as software fees and licensing.
How can I increase marketing ROI?
To maximize the impact of your marketing initiatives and earn more from your investment, you need to achieve better results with your budget. The following tips will help you improve your marketing ROI.
- Set clear objectives: Success measures will change dramatically based on the objective of your marketing collateral. For example, the success of a brand awareness campaign should be measured on ad recall, whereas a purchase campaign should be measured on sales volume.
- Develop buyer personas: Buyer personas give your target audience character, allowing you to tailor marketing content and communications to their unique needs better.
- Optimize your content: Deep diving into analytics will allow you to improve your content in real-time to identify what’s working and what needs improvement. Content creation platforms let you better understand how your content translates to business impact by examining user behavior on a page-by-page basis, unlike legacy formats like PDFs.
- Owned channel: Investing in your email marketing, SEO, and organic social channels will help you reach and convert audience members already familiar with your brand.
- Paid channels: Find new audiences via major paid media networks such as Google, Meta, and Display to promote your product or service. Implement retargeting campaigns to reach website visitors who did not convert initially.
- Conversion Rate Optimization (CRO): Continuously optimize your website and landing pages to increase your conversion rate. Even minor improvements from 1% to 2% can significantly impact your ROI.
As with all improvements in your marketing efforts, remember that this is an ongoing process, and no single change is likely to shift your revenue overnight dramatically. Continuously monitor your changes and stay updated with industry trends to stay ahead of your competition.
We unpack this further on our blog: How to measure the ROI of your content marketing.