Lesson of the Month: The Importance of ROI Tracking
I met a man — let’s call him Will — at one of my recent 3 Days to Cash Workshops and we got to talking about ROI.
Will runs a spa repair business told me he runs advertising (radio and print), seller promotions, buyer promotions, and other marketing functions. He told me he sends out coupons every so often to his target markets, often offers rebates on his products, and has usual holiday/showcase sales.
I was glad he was doing a lot of marketing to reach his targeted customers, but when I asked him how they were working out for him, he said, “Really great.”
I peered closer and asked him what his ROI was.
He said, “What’s that?”
Will wasn’t familiar with the acronym, but ROI is your Return On Investment.
I know a lot of you reading this are probably thinking this is a “Business 101” term, but even those of us who know it don’t really know it.
Here’s why: Your true ROI should be measured all the way throughout your sales process. It should take the ratio of how much money you spent on the advertising/promotion method with how much money was brought in from a buyer through that method.
This can be very tedious.
For example, if you run Facebook ads for one month that push people to sign up for a free webinar you’re running that leads them into a buy at the end of the webinar and an upsell 2 weeks after, here’s what the numbers might look like:
You might spend $2,500 on advertising, get 1,250 clicks and 250 registrants for your webinar. Of these registrants, 100 actually log in to the webinar online. Of these 100 viewers, 25 of them buy your product for $47 at the end. That’s $1,175 from this group of people. Say 5 of them go on to buy your $197 upsell 2 weeks after that. That’s $985.
And this is where your sales to this group ends. All together, you made $2,160 from this group of people. But you spent $2,500 bringing them to your webinar, meaning your ROI was -$340.
But if I ask you how your Facebook ads did, you’ll probably say, “We got 250 registrants from them!”
Why? Because this figure is easier to track. It’s more time consuming and takes more diligent work to track actual monetary returns. It’s very difficult to track awareness and impact returns (how many people actually see and learn about your product), so we’ll just focus on money for the time being.
And this example was just on Facebook expenses. Imagine tracking coupons, LinkedIn ads, Twitter ads, rebates, premiums, loyalty programs or joint ventures.
It’s very demanding.
But tracking meaningful returns on your marketing efforts is just as important as the marketing efforts themselves.
This is the only way you can reach higher efficiency in everything you do. And as the busy person I can imagine that you are, efficiency is probably high on your list of priorities.
Now, getting this down to an exact science doesn’t happen overnight. It requires a diligent team and consistency. And a unrelenting commitment to knowing what your money is bringing you.
So don’t feel bad if you’re not where you want to be.
The day to fix this is today.
If you need formulas, spreadsheets or general help with tracking, email my marketing team at firstname.lastname@example.org to get started.