What is a good marketing return on investment?
A good marketing ROI for digital marketing is 5-10x what you spend on marketing. If you spend $1,000, you should look to make $5,000-$10,000. Making your marketing spend a percentage of revenue is a good way to analyze if something is working. For example, at a 10x return rate, marketing spend is 10% of the revenue generated. Also, anything below 2x is considered not a good investment.
There are other factors that go into marketing ROI, here is everything you need to know.
Return on investment, or ROI for short, is used to evaluate efficiency by comparing the amount spent on marketing to the revenue earned. This key performance indicator is used as a benchmark for shaping future digital marketing practices and identifying areas of opportunity within your business. However, calculating your company’s ROI should extend beyond its dictionary definition and be specific to your business’s financial goals.
Why is it important to track ROI?
Measuring ROI is essential, as it provides insight into the effectiveness of your marketing efforts. Having the data to predict whether an investment will result in a positive return allows companies to make wise financial decisions that will ultimately aid in the growth of the business. While most digital marketing companies strive for an average return of 5 times what is spent, a good marketing campaign has the ability to produce a 10x return for their client.
Accurately computing your ROI will be an essential figure for your company to make informed decisions when investing.
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How can ROI be calculated with digital marketing?
So, now that you know what a good marketing ROI is, we will show you how your company can precisely calculate its ROI!
Many digital marketing companies struggle to provide their clients with an accurate ROI figure due to the varying definitions of success. Some companies identify success through lead generation, while others measure success by closed business. At Phlash Consulting, we consider both when calculating our customer’s ROI. Each company is unique, but we still want to produce real numbers for our clients and display an accurate return rate. In order to do this, our team breaks down the calculation of marketing ROI into two parts; visibility and closed sales.
- Visibility
Visibility is measured by creating an online presence for your brand through different channels of advertisement. Two crucial factors contributing to your company’s website traffic are your off-site and on-site SEO. Traffic from off-site pages such as your Google Business Profile, Yelp account, social media, etc. increases the credibility of your website. On-site SEO is done by optimizing elements of your website in order to rank higher on keywords and earn more recognition from search engines.
Your website activity from the last 28 days can be viewed under the performance tab of your Google My Business profile. Businesses with quick turnaround times will see a higher percentage of more valuable leads whereas service businesses with an extended lead time will be lower.
- Closed Sales
The next step in quantifying your ROI is to use the compiled data within your CRM to determine an average transaction invoice for your business. Having a CRM software system is imperative for business owners to stay organized and keep track of all communication between customers. After finding your average transaction value, we examine which leads were actually closed. This is because producing leads is not of high value unless they are converted into actual jobs. We then pull data from our client’s various advertising platforms to see how people interacted with their website.
With this information, we can form the most accurate metrics for our clients.
If your company is not looking to work with an intricate CRM, here is a simple lead and estimate tracker spreadsheet we have developed.
How long does it typically take to see results in digital marketing?
For a well-planned strategy, the amount of time it takes to see ROI really depends on your buyers’ sales cycle. By 6 months our clients usually begin to see our digital marketing strategies pay off, and will likely gain revenue as a meaningful result within the first year.
Tracking your monthly leads and closed business through a CRM or spreadsheet allows your company to see how it’s performing from an ROI perspective. If your digital marketing company is not providing you with these analytics or tracking these figures, we suggest asking them for data on your ROI. Our team offers this information on a monthly basis due to its importance for tracking progress.
At Phlash Consulting we believe that digital marketing companies should be an asset, not another liability. If you are looking for a company that wants to see you succeed, you can set up a meeting to discuss your business – click here.