Regardless of the type and size of your business, the importance of marketing can never be understated. It is what helps your target market find you, and it helps you establish a presence in your industry. Because of how essential it is to the success of any business, it’s a given that you’re going to have to invest in marketing. The only problem is that the cost of marketing varies between products, businesses, and markets.
There isn’t a definite value to place on how much you need to spend on marketing. No business owner in their right mind would want to overspend on anything, much less spend a single dollar on something that isn’t going to produce results. As with many business-related expenses, determining the optimal amount to need to spend on marketing will require a little trial and error. You’re going to need to test the waters before you dedicate valuable resources to a particular strategy. And this is where ROI Marketing comes into play.
What Is ROI Marketing?
Return on investment marketing is a measurement tool that allows you to determine how effective a particular marketing strategy is at creating conversions. This is an especially important tool for small businesses that cannot afford to waste any money because of their limited resources.
What Are Its Metrics?
Determining the effectiveness of a particular marketing strategy depends on three factors:
- Cost of Goods Sold – This refers to how much it costs to produce the product that you intend to sell (and to market).
- Marketing Investment – This refers to the amount of money you spend on your marketing strategy. This can include anything from production fees to commercial fees. This is also what’s going to help you weigh the amount between how much your marketing campaign costs and how much the marketing strategy actually helps your sales.
- Revenue – Revenue refers to the amount of money you earn through the sale of your products or services. For this to be relevant, you have to consider only the revenue earned through the marketing strategy used.
There are various ways to compute your ROI for marketing, but a general way to do so is to add up your marketing and production costs and to subtract this from your revenue. The higher your revenue generated by a particular strategy combined with the least amount needed for your marketing campaign is the most effective strategy.
How Can You use It?
The primary purpose of using the return on investment marketing is to determine what marketing strategies are effective and which ones aren’t. But that’s a very bland way to put it. Determining what marketing techniques best suit your needs and budget not only allows you to select the marketing techniques that get you the most conversions but also helps you to divert your resources to more important aspects of your operations. A general rule in making a profit is to minimize your expenses while maximizing your revenue. The best marketing techniques don’t always have to be expensive. When you have a marketing tactic that draws a lot of conversions but costs more than the revenue you can bring in with it, then, it’s not a very practical tactic to employ.
Some Basic Tools To Determine Marketing ROI
Calculating your marketing ROI is a complex process. While there’s a general idea of how to come up with relevant figures, a more accurate way to determine your ROI is to use tools that are able to process detailed data. An added advantage is that many of the tools used to analyze data are already being used by analysts, which means you’ll save money on training and the need to purchase new tools.
Google Analytics is the staple tool of any digital marketer. The wealth of data that the tool collects will be able to provide an accurate estimation of how a certain marketing technique affects your sales. Some social media platforms, like Instagram, even have business analytics built into them to help users evaluate their content better.
The digital marketing space is defined by the internet users. If your marketing technique is able to generate traffic and conversions, this is going to show up on your analytics. Even the number of comments, likes, and shares can be used as a metric to determine what type of content your audience wants.
Customer Relationship Software refers to any tool or method that enables businesses to better collect and organize customer data. The value of being able to collect and organize customer data is that it helps businesses determine customer purchase behavior. This, in turn, helps businesses determine what types of products their customers are looking for as well as what type of content resonates best with their customers.
Consider the fact that we all enjoy different types of media. Some people prefer to read, while others prefer to watch and listen. Some want content that is more serious, while others prefer a friendlier tone. This diversity is something that you need to take into consideration when selecting a marketing tone for your campaign.
Call Tracking Software
Call tracking software is one of the more advanced tools that marketers use in digital marketing. This allows businesses to see what pages and keywords a visitor has seen and used, and what marketing medium led them to your website or compelled them to make a call. This works by assigning a unique tracking number in your paid ads. This number detects what pages a user views and even when they make a call. In essence, they track the entirety of a visitor’s journey on your website and how far they get, which also shows the quality of the leads generated by a particular marketing effort.
Once again, marketing is not something that comes cheap. This can be restrictive, especially if you’re running a business that has little capital. If you currently don’t have resources to spare for marketing, these free marketing ideas for small businesses could be a lifesaver.