3 Ways to Measure Marketing ROI as an SMB
Have you ever measured your marketing ROI as an SMB?
As marketing consultants, SMB owners often ask us, ‘’What can marketing do for my business?’’ or ‘’How can I know if my marketing efforts are paying off?
These are valid questions and are worth exploring.
As a small or medium-sized business owner, calculating your marketing return on investment (ROI) is crucial to ensuring you get the most out of your marketing efforts.
Knowing how to calculate your marketing ROI can help you make informed decisions about allocating your marketing budget and resources.
Marketing strategies aim to boost revenue while minimizing the costs of acquiring new customers. So, as a first step, we rule out if any of the 5 common mistakes when developing your marketing strategy are in play.
Then, we dive into measuring marketing ROI – determining the profitability of marketing efforts.
The standard formula for calculating ROI is the following:
ROI = (Net return/cost of investment) x 100
Let’s dig deeper and see how this formula can apply to your marketing campaigns.
3 ways to measure your marketing ROI as an SMB
If blogs are part of your marketing strategy, knowing if your time-related and promotion costs are paying off is essential. While having an active blog significantly contributes to your overall SEO strategy, it’s equally important to evaluate if your blog readers are converting into leads.
If your blog is linked to a landing page designed to convert leads, it’s essential to use a tracked URL to know your lead’s origin.
How to calculate your blog ROI:
- For example, it takes 4 hours to write a blog post, and you pay your team member $25 per hour. So, your time-related cost is $100 ($25 x 4 hours)
- Promotion of the blog (i.e. sponsored or boosted posts) costs $100
- So, your total cost is $200 for this campaign
- This blog post generates 4 leads and 2 of those leads become clients. The lead conversion rate is 50%.
- Each client brings in $500 for the company.
ROI = [((4 x 0.5 x $500) – $200) / $200) x 100]= 400%
The same concept can be applied to your social media posts. In this case, it is just as important to use tracking URLs to determine if your content is driving traffic to your landing page and to know where your leads originate from (i.e. from which social media post or platform).
Deciding whether to place an ad in an online magazine or an email newsletter can be tough. If your persona frequently reads these mediums and makes purchase decisions, it may be worthwhile to advertise and evaluate the outcome after a certain period.
How to calculate your online paid advertisement ROI:
- You have an e-commerce business that offers organic granola bars. You decide to place an ad in a health food newsletter that sends weekly email newsletters. You pay $50 per ad placement per week. At the end of the month, you typically spend $200.
- Using tracking URLs, your ad is linked to your product page, where leads can purchase organic granola bars.
- At the end of the month, this ad has generated 120 visitors to your product page. 75 visitors added products to their cart, and 15 people purchased from your online store. Your lead conversion rate is, therefore, 20% (15/75). The average cart is $28.
ROI = [((75 x 0.2 x $28) – $200) / $200) x 100]= 110%
By comparing this ROI to other marketing efforts, you can determine if this medium is worth the continued investment.
Tradeshows & Events
Attending a tradeshow can be a considerable expense, which makes it essential to calculate the ROI to determine if the investment is worthwhile in the long run. While attending tradeshows can enhance your brand and increase overall awareness, evaluating whether the leads generated from these events result in paying clients is equally important.
How to calculate your tradeshow ROI:
- Booth reservation = $4,500
- Shipments of booth and marketing materials = $2,500
- Travel & lodging = $1,500
- Event sponsorship = $500
- Sales person salary = $2,000
- Total cost of event = 11,000
Leads & Sales:
- Visitors (i.e. number of booth visitors or business cards received) = 125
- Meetings booked with current & potential clients = 25
- Number of clients who purchased following a meeting = 5
- Lead conversion rate = 20% (5/25)
- Average sale per client = $6,500
ROI = [((25 x 0.2 x $6,500) – $11,000) / $11,000) x 100]= 195%
By setting key performance indicators (KPIs) for each of your marketing campaigns and comparing your ROI results, you can determine the effectiveness of your efforts and adjust your marketing budget as needed.
Maïeutyk has been developing successful marketing strategies for small and medium-sized businesses for over a decade. To learn more about our services, please contact us. Or, take our short diagnostic survey to discover your needs and receive your results straight in your inbox.