3 Ways to Measure Marketing ROI
As a business owner, ROI is a way to measure if what you are doing is getting you the results you are looking for. As defined in an article by Entrepreneur.com, “ROI deals with the money you invest in the company and the return you realize on that money based on the net profit of the business.” Pretty simple right? However, some ROIs are easier to measure than others.
One of the more difficult ROIs to measure is marketing. How do you measure an investment that may not result in an immediate profit? Ongoing efforts and marketing campaigns that piggyback on one another without set time limits make measuring ROI challenging.
The answer is measuring marketing ROI takes time.
Here are 3 ways to measure marketing ROI.
1. Conversions per marketing campaign.
Measuring ROI on a per campaign basis allows you to set specific goals that may not always be based on a purchase. Some examples of non-monetary goals are signing up for a newsletter, getting a free trial, or even just following your business on social media.
2. Customer acquisition cost (CAC)
To calculate CAC or customer acquisition cost, take the amount of money you’ve spent on marketing over a specific time period and measure it against how many new customers or clients you’ve gained. This metric accounts for the dollars spent for those conversions like newsletter sign ups, social follows, etc. CAC is a good method of measuring the long-term ROI of all your marketing efforts.
3. Customer lifetime value (CLV)
Customer lifetime value is the dollar amount a client or customer is expected to spend during their relationship with your business. It is calculated by taking the customer spend per year, multiplying it by the length of the relationship, and subtracting the CAC (customer acquisition cost). CLV or customer acquisition, helps you measure the long-term impact of your marketing dollars and adjust your efforts to achieve your ROI.
While measuring the ROI of your marketing may be more challenging than other measurements of business profitability, by taking into account these three metrics and giving it some time, you will be able to find your marketing return on investment.