Have you recently calculated an advertising campaign? Are you ready to calculate the real return on your investment?
Many business owners ineffectively calculate the ROI of their advertising campaigns or, in other cases, have no idea how to calculate that vital information in the first place. With these strategies, however, you can stop wasting your time and get a more effective look at what your advertising ROI really looks like.
Factors to Consider When Determining ROI
There are several factors you must consider when determining ROI. First, you must consider what you have actually spent on your campaign. Start by considering the time spent on the campaign. How long did it take to create the campaign? How long did you spend working on it? Your time, and the time of your employees, has significant value. Next, consider the production costs: the actual cost to produce the ads. This might include studio time, paid actors, and editing. Finally, consider the cost to run the ad: what are you paying to get that ad in front of your customers?
Once you have calculated those factors, you will have a better look at what you have spent upfront on the ad. This, in turn, can make it easier for you to calculate the actual return on that investment.
ROI Conversion Equation
Marketing specialists have created a basic equation for calculating ROI, which is usually expressed as a percentage. Simply, this equation is the cumulative net benefit, or the profit you make from your campaign, divided by the total costs of the campaign. With this simple equation, you can do a better job of determining exactly what your campaign cost and its overall worth to your business.
Once you have defined the initial return on your investment, you can consider factors like which advertising channels offer the highest return on your investment or which ads have created the best overall impact. A solid understanding of the ROI of a given campaign may, for example, help you decide for or against that advertising medium in the future, or guide you to consider other methods that will allow you to connect with your customers and expand your overall reach.
What is a Good ROI?
Many business owners and advertisers find themselves wondering, "What is a good ROI, anyway?" How much should they expect their campaign to be worth overall? When is it worth continuing to invest in a specific medium, and when should an advertiser consider a different method? Understanding ROI isn't just about looking at the numbers. It also requires advertisers to consider when they have achieved their goals and when they need to take a different advertising approach--but how do you define "good" when it comes to the return on advertising investment?
Ultimately, a "good" ROI will vary depending on the campaign and the company. Sometimes, your goal may not be to substantially increase sales. You may want, instead, to increase overall brand awareness, or to improve customers' connection to your brand. Other times, you may have a more specific goal of increasing sales of a specific product or in a specific area. You cannot assume that because you have specific results on one platform, lower results on another have not achieved your goals--though it may help aid your decision about future marketing on those platforms. Likewise, just because one business experiences a specific ROI for a given campaign on a platform, it does not necessarily follow that every business will see the same results.
As a rule of thumb, your goal is to make more than a dollar for every dollar spent on a particular advertising campaign. If you find yourself spending more on advertising than you make in return, you may need to reevaluate your advertising efforts and consider what you need to change in order to create more effective ads in the future. Keep in mind, however, that it can sometimes prove difficult to determine the exact ROI because of the type of campaign. Digital campaigns, for example, are automatically tracked, which makes it easy to see results. Other types of campaigns, like content marketing, can prove more difficult, since you may not know exactly which sales to attribute to the campaign or which customers have seen a specific campaign.
ROI looks different for every campaign and every company. A small company, with a smaller advertising budget, may in turn see a smaller return on their investment. Likewise, a larger company may discover that simply pouring more money into the same campaigns does not allow them to experience a higher return on their overall advertising investment. As you grow your marketing efforts and continue to analyze your efforts, you will find that you have a better idea of the worth of your campaigns, including how you can add more value to future ads.