At face value, measuring the success of your business is easy. You’re either in the red or the black at year end. Measuring the success of each marketing program ultimately ties in to your business’ overall success. If your marketing plan isn’t working, you’ll see a lot of red ink. More and more VARs are finally realizing they must have a way to measure the return on investment of every marketing program. It’s no different than having a “checks and balances” system in place. If it works well, why? If it doesn’t, why not?
Do you really understand the meaning and value of ROI? Sure, you measure the success of your co-op programs/Marketing Development Funds (MDF) and base its ROI on activity. You communicate your ROI through your channel partners. You realize there is a need for better ROI tracking and want to measure your business’ success on ROI, based on revenue. You even acknowledge that you should have a way to track ROI for every program and promotion. Yet at the end of the day, you may actually have a lack of clear ROI!
Why is this? Based on the constant buzz about it, we know that ROI is important, but simply attaching a way to measure effectiveness to each program doesn’t guarantee that you will produce clear results. Do you understand what you are actually (or should be) measuring? Have you planned and executed programs so that you can truly measure them? If you are being asked to justify your programs and promotions, do you have the tools and resources to show off your program’s objectives, activities, and results in a positive light? If not, you need to create something pretty quick to keep those programs off the chopping block.
Their survival may just depend on how well you can measure their success.
Here are a few steps to setting up a simple ROI scenario for your marketing pieces:
– Determine the cost of the individual program, promotion, brochure, or marketing item-and do this for every marketing piece and program. Include all the expenses involved in bringing this program to fruition, such as labor costs and branding costs (public relations, advertising, website initiatives); and print, web/email, and direct mail costs.
– Determine the potential number of impressions of each piece in the plan. How many brochures will you mail out? How many people will receive your email? What is the circulation of the newspaper or magazine that you’re advertising in or sending your press release to? If you can’t quantify something, use “0” impressions, but include the cost for this in your equation.
– Gauge the response rate you might receive for each piece of the program. Based on past history, you might have this information. Otherwise, take an educated guess (i.e., an average of 15 percent of recipients open their email blasts). Check out the Direct Marketing Association’s Response Rate Trends Report for more detailed information.
– What are each customer’s’ annual sales with you? Know the dollar value your customer has within your company based on annual sales.
With this information, you can now create a formula, based on how the expenses of the program stack up against the number of impressions and perceived response rate. Create estimated total revenue, subtract your expenses, and-voilà!-you have your ROI.
