As a small business owner, you know the costs that are associated with marketing. You spend a lot of money on it because it is a very crucial aspect of the growth and development of your business. There may have been times in which you questioned the effectiveness of your marketing and if it was worth the money. Maybe you have spent thousands of dollars in the past with little results, so you may be skeptical about getting the return on your investment. Thankfully, we understand marketing ROMI and want to share our brief guide to understanding marketing ROI and how to use it effectively.
What Is Marketing ROI?
Simply, marketing ROI is a way to measure the return on your business’ investment in its marketing. Your ROMI helps justify the amount you spend on marketing, helps you know what to spend your money on, helps you understand how your marketing efforts compare to your competition and it helps hold your marketing plan accountable.
Being able to defend your company’s spending on marketing is important. With those tangible numbers, you can explain to anyone how much of an impact marketing has on the profitability of your business. Knowing what to spend your marketing budget on is crucial because you want to make sure you are spending money on the marketing strategies that have a higher return of investment. Understanding how you fare against your competition will give you a good idea of how you fare against your industry as a whole.
How Do You Calculate ROMI?
There is a simple formula you can use to easily calculate your ROMI. Simply put, it is the difference between the incremental financial value gained as a result of the marketing investment and the cost of the marketing investment over the cost of the marketing investment. One thing to keep in mind while you calculate is that you want your total number to be high and positive. It is recommended that you create a bottom-line for your ROMI that way you will have a better idea of when to be apprehensive about investing more money into marketing.
Calculating your ROMI accurately can be challenging for a number of reasons like knowing which costs to include as part of your marketing investment number. As a rule of thumb, it is recommended that you include creative development, media spend and customer-facing staff time when trying to figure out the full cost of the marketing activity. You should also determine your sales baseline in order to measure your incremental financial value.
What Mistakes Should I Avoid?
The biggest mistake is thinking that money spent on a marketing plan is money wasted. Keep in mind that marketing is a huge part of brand exposure and generating new leads. The return on your investment may not happen overnight. It takes patience and understanding in order for you to see the results of your money spent on your marketing plan.