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Easy explanation of what is ROI for marketing beginners

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There is a wide array of marketing campaigns that a company can choose. As such, each will determine the metric of success of the business. Over the year, digital marketing has been vital in the growth of any business—small and large. Startups and small businesses have resolved to use multiple marketing channels to acquire and retain hundreds of thousands of clients.

To achieve the goal of your business, striking a deal with a company like PRable, or similar options with transcending track records in digital marketing techniques.

The ultimate goal of all businesses is to secure a profitable return on investment, irrespective of the marketing team. Most businesses entrust the proficiency of marketing agencies when it comes to advertising their products and business.

Before investing in any marketing campaign, every business needs to question what would be the trajectory on the return on investment for foreseeable fiscal years. Marketing needs to be viewed as a lifetime investment as it is not a onetime project. Marketing is the lifeblood of any successful business, and the ideal way to understand the effectiveness of any marketing campaign is by calculating the return on investment.

Here is a list of the way business owners and marketers can calculate the ROI.

1. Monthly unique visitors

Unique Monthly Visitors tell the number of people visiting your website within a month’s period. With such data in hand, the marketers and business owners will have a full understanding of the impact of the marketing campaign for the last 30 days. For instance, The Google Analytics websites show the source of the website traffic- whether it’s from social, paid, or organic.

monthly unique visitors
Credit: Freepik

With the help of experts and advanced online marketing tools, business owners will be able to analyze the monthly traffic, know the number of prospects that converted, pages that did better than others, and come up with strategies to improve for more traffic and converts.

2. Cost per lead

Marketing is a long time investment, as such, cost per lead is a marketing campaign that helps entrepreneurs have the full and clear insight on the amount the money that was used to generate potential customers and what was gained from the investment.

Ideally, every marketing campaign has a varying outcome, the more the business spends on the advertisement, the better the chances of exponential profit growth. Mathematically, cost per lead is calculated by;

Cost Per lead= Amount of money spent on Ads/ The number of Customers attracted

3. ROAS – Return on ad spend

This is a fundamental metric that helps explain the revenue made on the amount of money spent on advertisement campaigns. It is easy to find the ROAS by dividing income with the amount used in adverts.

It helps to increase the number of traffic on your website. Why is ROAS a great metric? It is all-rounded as its model combines both CPL and CPA. For online marketers, return on ad spend is the best choice to track down the performance of their business.

4. Customer lifetime value

This is one of the easiest ways to evaluate whether the marketing campaign is adding value to your investment. The ROI is calculated by finding the revenue generated by the customer. It shows both short term and long term influence of the marketing campaign. To calculate the lifetime impacts, find the average value of the customer in a week, then multiply by the number of weeks in a year.

5. New customers per month

To track the performance of your marketing campaign, it is vital to calculate the number of new clients that your business attracts every month. Regardless of the business model you choose, calculating the average amount of money spent by the customer will help to know their worth and the profit revenue that your business is generating.

6. Lead to customer conversion rate

This ROI metrics measures the percentage rate at which an ad brings more customers. Why should a business use this marketing return on investment? It helps them to avoid spending a lot of money trying to boost their traffic.

It is easy for a marketer to calculate the lead to customer conversion rate by dividing the number of the customer with the leads created in a specific time frame.

7. Average order value

This is the fundamental metric measure for the online retailer. It is simply calculated by dividing the total income by the number of orders placed. For an online retailer, this is the ideal way to have a clear understanding of the sales patterns.

If online retailers increase their average order, the revenue increases simultaneously. Average order value is a holistic metric that also helps e-commerce to calculate the customer lifetime value.

The essential things of adding an average order value on your electronic commerce dashboard, it will also help you track other crucial metrics such as gross profit margin, customer acquisition cost, shopping chart boards, and revenue by traffic source.

8. Cost of customer acquisition

This is simply the sum of the money spent to get a customer. Although this method is commonly used by established organizations and investors to calculate the profit revenue of their business, a smaller business marketer can also use it to show the efficiency of the marketing campaign.

The cost of customer acquisition can be obtained by dividing the sum of the value used to get the customer by the number of customers.

Wrapping up

As you can see, there are plenty of ROI calculation methods available. But the key is to use the right one for your business. This article should set you on the right track to finding the right metrics for you, so you can keep growing your business further. Good luck.


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