![]() ![]() Which of these touches should receive credit for the revenue? Should it be the first touch-the original Tweet? Or should it be the newsletter, which obviously appealed to the prospect because she opened each issue and even clicked through on three articles? Or what about the event, which was the last touch before the prospect finally became a customer?ĭetermining customer lifetime value (CLV)Ĭustomer lifetime value is the total worth of your customer’s business throughout the entire duration of their relationship with your company. So far, so good.īut what if the prospect doesn’t end up buying anything from your organization for months? Meanwhile, she visits your organization’s website four times, clicks through on three marketing newsletter articles, downloads information, and also attends an event. A specific Tweet brings a prospect to your website (easy to measure via web analytics), where she signs up for your newsletter (easy to measure via a marketing automation system). Here’s why: suppose your organization spends heavily on social media. ![]() Unfortunately, it’s sometimes difficult to attribute marketing ROI to any one program or campaign. How hard could it be to connect the dots? Marketers can use these tools to track the money they spend on marketing programs that generate sales and revenue. The challenges of calculating marketing ROI?Ĭalculating marketing ROI seems like it should be easy-especially when you consider that today’s marketers have access to powerful reporting and tracking tools through web analytics, customer relationship management (CRM) systems, and cross-channel marketing analysis. That way marketing ROI becomes a key component of an enterprise revenue performance management strategy. In this model, marketers can compare the programs that were most effective at getting prospects to buy with those that were influential across multiple sales. Marketers should stop choosing direct over indirect attribution and instead use both. ![]() With indirect attribution, the revenue from the sale is apportioned evenly across all touches. In the example above, most marketers would credit the last touch before the prospect buys. With direct attribution, all of the revenue from a sale is attributed to only one marketing touch. Most marketers measure the marketing ROI of programs via either direct or indirect revenue attribution. ![]() NOTE: Simple ROI = (sales – marketing cost)/marketing cost Using direct and indirect revenue attribution An excellent campaign might see a cost ratio of $10 generated for every dollar spent (10:1) with a simple marketing ROI of 900%. The cost ratio = revenue generated: marketing dollars spentĪn efficient marketing campaign may result in a cost ratio of 5:1-that is, $5 generated for every $1 spent, with a simple marketing ROI of 400%. This formula calculates how much money is generated for every marketing dollar spent. Ways to calculate marketing ROI Using cost ratio to determine ROIĪlternatively, you can track marketing ROI by looking at the cost ratio, or efficiency ratio. Regardless of the ROI you choose to track, most of them are calculated in the same way. CPA, on the other hand, is measured in either sales or marketing leads. For example, revenue/bookings are measured in either net sales or bookings. It's important to know the difference between each type. There are several types of marketing ROI: Once you understand your marketing costs, you can make better decisions to create revenue streams that make your business more profitable. To make informed decisions about where to spend your time and budget, you need to know the cost of each strategy. Today’s marketing is no longer a simple matter of “getting traffic.” It’s a complex process with multifaceted strategies across digital and traditional platforms. They might be estimates at first, but even having benchmarks can help you set a target to measure your campaign's success. Before starting any new campaign it's important to understand your numbers. ![]()
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