Brand Marketing vs. Performance Marketing
June 6, 2023
Should you prioritise building a strong brand image or focus mainly on driving immediate sales? Let’s address this question today…
How to Calculate the ROI of Different Marketing Activities
Calculating the return on investment of your marketing activities is essential for ensuring they are profitable. This is particularly important when it comes to costly endeavours such as events, exhibitions, and content marketing – all of which are valuable tools for reaching potential customers.
If you’re not tracking how much revenue each activity is generating, it can be challenging to decide where to focus your time and resources. Therefore, a detailed ROI analysis can determine which marketing activities are providing the greatest value, and where you should increase or decrease your spending. In this article, we’ll explore how to calculate the ROI of the activities mentioned, and some other ways to measure the value of content.
How do you calculate ROI?
In some cases, you may want a broad view of how an entire marketing campaign has contributed to sales, in which case, you use the following formula:
ROI = (sales growth – marketing cost) / 100
In this case, sales growth refers to the amount by which sales have increased since launching the campaign.
This formula is not the most accurate, as it doesn’t account for other factors that could have influenced sales growth. For example, it’s expected that sales of ice cream will increase in hot weather, regardless of any associated marketing campaigns. This formula may be helpful for a quick overview but it’s important to be as scientific as possible in order to truly understand the returns that your marketing efforts are bringing. We’ll look at some other approaches below.
How to Calculate the ROI of Events and Exhibitions
There are many different types of events that marketers host, such as conferences, webinars, panel discussions, product launches and thought leadership events. Successful events build brand awareness, engage potential customers, generate leads, and increase sales.
One way to calculate the ROI of your events is to record the total amount spent on the event and then track revenue generated for the next 90 days. Event revenue can come from a variety of sources, such as ticket sales, sponsorship revenue and product sales.
To calculate event revenue, add up the total amount from each source, then divide the result by the number of days in the 90-day period. For example, let’s say you host a two-day event and spend £10,000 on it. If you generate $30,000 in revenue from ticket sales and sponsorships, and add £15,000 in product sales, your event ROI would be calculated as follows:
£30,000 + £15,000 = £45,000 – £10,000 = £35,000 net profit
£35,000 / 90 days = £388.88 revenue per day.
Instead of calculating the daily returns, you can use the following formula to establish the ROI as a percentage: ((return – investment) / investment) x 100 = ROI.
For the above example:
£45,000 – £10,000 = £35,000
£35,000 / £10,000 = 3.5 x 100 = 350% ROI
The above is a good example of how to calculate the ROI of an event, but there are other success metrics you can track. This can include the number of leads generated from the event and their quality, the number of sales created by the event, the increase in brand awareness, and the level of engagement with your audience. We’ll discuss those metrics in the next section.
Calculating Your Overhead Factor
It’s important to include your overhead factor in your ROI calculations and if you have an accountant, they may have that figure to hand.
Overhead factor is a measure of the total cost of doing business, expressed as a percentage of total revenue. It is calculated by dividing overhead costs (such as rent, taxes, and insurance) by total revenue. This figure gives an indication of how much it costs to operate the business in comparison to its income.
Knowing the overhead factor helps businesses plan their operations and budget for the future, as well as set appropriate prices for goods or services in order to cover costs without pricing themselves out of the market.
The formula for calculating overhead factor is as follows:
Overhead factor = overhead costs / total revenue.
This can be broken down further into the following:
Overhead factor = (fixed costs + variable costs) / total revenue.
How to Calculate the ROI of Content Marketing
It’s much more straightforward to calculate the ROI of events compared to content marketing. There are many moving parts when it comes to your content strategy as well as the customer journey. It can therefore be hard to know if your efforts are paying off. To make sure your content marketing ROI remains positive, it’s essential to calculate it regularly.
It’s also important to calculate the ROI for each channel you use, whether that’s your blog, Instagram, other social platforms, podcasts, or anything else. This is extremely important as it will indicate where your audience are most engaged and therefore, you can capitalise on those channels or troubleshoot as to why certain channels are underperforming. Once you have a figure for each channel, you can put it all together to determine your overall ROI.
The most simple method to calculate ROI for content marketing is to establish the number of leads generated from your content and the total sales from those leads. Total sales minus the cost of producing the content will give you the net profit.
It would be exhausting to measure the return for every piece of content so instead, you’ll want to calculate the total revenue generated within a given period, such as a month. (You can use the formula mentioned in the previous section for calculating the ROI of content marketing.)
Remember to include all overheads in your calculation. If calculating the ROI of your social media content, you need to include the pay for any staff responsible for managing posts, the cost of any social media management tools (and any other related software), and your overhead factor, as mentioned.
The ROI of Social Media
As usual, the formula, (sales growth – marketing cost) / 100, can give you simple insights. And as with other forms of content marketing, it can be tricky to quantify the direct impact your social media efforts are having on sales. This means that you need to consider other metrics such as growth in follower count alongside ROI.
With social media algorithms changing frequently, it becomes all the more important to keep a close eye on your ROI. Calculate it often in order to keep track of how it’s fluctuating so you can adapt your strategy as necessary.
The ROI of SEO
Once again, the impact of SEO on sales is a complex, non-linear matter and can be determined using the formula above as well as other metrics. SEO is a long-term strategy – if the ROI early on is not what you were hoping for, that doesn’t mean the results are not paying off. With new websites, it’s all the more important to consult other metrics to observe how the site’s rankings are improving. Organic traffic, organic click-through-rate, and pages per session are just a few more helpful KPIs to consider.
The ROI of Paid Search
This is one of the easier areas to measure – you simply need to track conversions from your ads in order to calculate the return on a campaign, or even a specific ad. The more granular your approach, the more accurately you can optimise ads, such as when split testing.
Other KPIs that Indicate Value
Since every business and every campaign is different, there’s no one-size-fits-all way to calculate your content marketing ROI. In other words, you won’t need to measure sales in every case – you may instead want to measure traffic or brand awareness. It’s not as easy to establish the connection between these factors and the actual sales figures, but it is nonetheless essential to know whether your work towards these objectives is paying off. In other words, if the return you are interested in measuring is not sales but increased traffic, then you need to analyse your customer journey from that angle.
The customer journey can be complex and is often non-linear. While you want to measure the overall ROI of your content strategy, it’s important to measure the value in terms of factors such as engagement because the extent to which your content is engaging will contribute to a sale – the result just may not be immediate.
For example, suppose a potential client discovers your brand in Q1 and approaches you to enquire about your services in Q3. There is a complex journey with many touchpoints between those two milestones. The fact that they took action after being exposed to your content suggests the content is effective.
In my book, Digital Marketing Strategy, I discuss how to use engagement and consumption metrics – KPIs that examine the quality of customer interaction and discussion. These include:
- Content interaction: Page views, downloads, bounce rates, views of videos, and view-through rate.
- Social triggers: Retweets, shares, and posts.
- Social engagement: These metrics are proof of genuine engagement as they show that the reader/viewer is actively promoting your content. Amplification is the most sophisticated engagement metric – it measures the value of social sharing by considering the audience of the person sharing a piece of content. In other words, the more high profile the one sharing/the greater reach they have, the more valuable the content is considered to be.
While there is no way to measure the direct impact the content has had between the two milestones mentioned above, understanding these metrics can give a clear picture overall and is therefore a crucial endeavour.
Traffic is another important area, but there is no point in assessing the amount of traffic in isolation – instead, you need to combine this metric with others such as page views for visit, time on site, which pages are most viewed along the journey to purchase, conversions, and so on.
Brand awareness is another grey area, yet it’s a vital part of any content strategy. It can’t be precisely quantified, but some metrics to look at as indicators include social media reach, brand mentions, and branded searches.
Wrapping Up
Calculating your ROI is essential and should be carried out for every marketing activity you engage in. You should also do it on a regular basis.
The formula to calculate ROI is simple: returns minus investment, divided by investment; then multiply the result by 100 to get the ROI as a percentage. And don’t forget to include all of your direct costs for the true picture.
When it comes to content marketing, it’s important to calculate the ROI per channel, such as social media or your blog. Do so by checking how many sales have been generated by leads that came from the source in-question.
ROI is an essential measurement to calculate, but there are other indications of value to consider. Brand awareness is one of them – and one that is hard to quantify. However, looking at the associated metrics can give a clear indication as to whether you’re on the right track.
If you need assistance with your marketing campaigns, don’t hesitate to get in touch – my team and I would be delighted to help.
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