Planning for Marketing ROI – Part One

The return on investment (ROI) for your marketing campaigns is a useful measure of outcomes, but its real value is in guiding decisions to help improve profits. By quantifying the return on each marketing investment, you set out a yardstick to measure your program against desired goals. Ideally, the feedback you receive from marketing ROI reporting will lead to higher ROI.

There are three primary activities related to planning for marketing ROI:

1)    Establish your targets and ROI estimates first

2)    Make your marketing programs measurable

3)    Key in on decisions that improve marketing

In today’s post, we’ll look at why and how to establish your goals upfront.

Quantifying your expected returns is the first step in planning any marketing investment. Unfortunately, many marketing departments have a terrible habit of planning a campaign and committing funds without first establishing a solid set of expectations regarding the campaign’s impact. This way of operating undermines the perceived value of marketing investments.

So, you first must define your objectives and then pick suitable metrics that can help you evaluate your success in meeting your objectives. Your plan should include best-, worst- and middle-case scenarios – each one listing the risks of failure and contingency programs to manage risks. This should help you receive buy-in from your chief financial officer (CFO), and will give you some leeway when your estimates turn out to be imperfect (which is a certainty). Your ROI plan should help you to:

• Discover which profit drivers have the most impact upon your model
• Vary parameters for sensitivity analysis
• Indentify the targets that you will want to achieve

Some programs will have more clear-cut goals than others. However, all goals should include the following:

• Generated amount of incremental sales
• Produced revenue per sale
• Gross margin
• Total sales and marketing investment

The actual ROI figure is derived from dividing your return from your marketing investment. You can do it all on a spreadsheet, or you can buy sophisticated tools to help with tracking and calculations.

When tracking ROI, make sure to include all relevant expenses. This includes staff costs within the marketing department, travel expenses, and the cost to the firm of the time salespeople spend on following-up leads.

We’ll continue in our next post by examining how to design marketing programs to be measurable.

Eric Bank is a freelance writer who specializes in website content, online articles and blogging.