Track Your Marketing Success: See How $1 Turns To $10
Over the last decade or so, marketing has been revolutionized by the use of data analytics. These days, you can track your customers’ habits and their behavior, and react accordingly, almost in real-time. However, an area of marketing remains almost unchanged as the years go by – investment. Marketers still want to track exactly how much money they spent on their campaigns and different marketing strategies, and they are still interested in finding out exactly how big of a return this investment yielded. In this article, we’ll explain some useful strategies that could help you track your marketing dollar spend, while objectively calculating your ROI, and learning how to achieve your goals.
Let’s start with your budgeting
Marketing budgets typically range between 5%-25% of a company’s revenue or revenue targets, depending on various factors such as size, overall growth strategy, and others. For example, a company that aims to keep its market share will have between 2%-10% of revenue goals set aside for marketing, while a company that’s in its fast-growing stage will have up to 50% of revenue targets aimed at marketing.
While considering this, it’s also important to keep a 70-30 ratio within your marketing budget itself – 70% of the budget should be allocated for real plans, while 30% should be set aside for experiments, fixes, or as a general corrective. It’s always easy to shift any extra money at the end of the year to other uses (employees love them bonuses!), but it’s unavoidably hard finding that extra buck or two you need in an emergency.
The reason why you should set aside a third of your marketing budget for experiments and damage containment is that marketing is constantly evolving – something that worked for you in 2018 might not work in 2019. Experimentation with different marketing strategies, seeing what works and what doesn’t work, is paramount to finding out what resonates with your customer base.
By making clear budgeting plans at the start of each year (or quarter, which is also a common practice), it will be very easy to track your dollar spend throughout the planned period.
With Essence of Email’s Managed Services, you can plan your email marketing budget up to a year ahead, since we normally work on a 6-month renewal cycle.
Tracking marketing impact on revenue
After establishing strong, detailed budgeting for the forthcoming year, your next focus should be tracking the impact your marketing activities have on your revenue, rather than just tracking the number of (marketing qualified) leads they generated. In other words, a marketing initiative can be extremely popular, and generate a lot of interest, but have a very low impact on your overall revenue, marking it as unsuccessful. Common examples include new product launches, where the customers’ interest is piqued by sheer novelty, but no business is generated due to steep pricing, unavailability, or other factors.
We recommend a holistic approach to your marketing mix – looking into which factors generated the most business regardless of their popularity or creative acclaim. On top of this, a good approach would be to use multi-touch attribution, as opposed to single touch attribution, when analysing which activities generated revenue.
With single touch attribution, activities that are at the end of a funnel (e.g. a sales call, or website design) might receive unrealistic focus due to them being the last activity preceding a sale, which would then create an artificial skew towards them in your budgeting. In contrast to this, a multi-touch attribution allows for a bigger number of activities to each receive credit for the ultimate sale (e.g. a trade show, product design, email marketing, and website design can all participate in a successful sale), which means a more realistic budgeting scope when deciding which activities to focus on.
Essence of Email can provide a detailed monthly Metrics Report, as well as a Quarterly Audit report (for select product packages), which can help you in assessing the performance of your email marketing channel, pinpointing exactly what contributed to channel performance, and what was detrimental, ultimately allowing for realistic long-term revenue growth strategies.
Calculating your Return-on-Investment (ROI)
Finally, tracking your return-on-investment, and making sure you’re on track when it comes to both overall, and per-channel growth, is the ultimate statistic parameter you should be tracking. It is, in essence, the result of your marketing dollar spend, showing exactly what your invested money did for you.
A normal return-on-investment formula would be (Return-Investment)/Investment, multiplied by a 100 and displayed as percentage. However, for marketing, we want to go with something a bit more streamlined, since what’s important for you in this context is how marketing investments paid off. You can focus on an individual activity, or overall channel performance – the formula will stay the same: (Gross Profit-Marketing Investment)/Marketing Investment, again displayed as a percentage.
Additionally, since customer lifetime value (CLV) is the place to be, you might want to compare your marketing investments with customer lifetime value (measure of the profit generated by a single customer or set of customers over their lifetime with your company). What you want to do is use the same formula as above, just switch out Gross Profit with CLV.
To help you with calculating your CLV, Essence of Email partnered up with Klaviyo, an email service provider whose AI data analytics system allows for seamless calculation of individual and aggregate CLV without the need for numerous manual calculations and formula knowledge (with certain terms and conditions applied, of course).
A caveat here is that the formulas above calculate a very theoretical, dry ROI that doesn’t necessarily need to correspond with reality. The reason for these formulas being 100% correct, and yet practically off, is that they don’t calculate in the overhead allocation and incremental expenses, which form a very sizeable chunk of the “field situation”. For example, you might have creative costs, printing costs, technical costs, etc. Hence, while calculating a realistic marketing ROI, the formula would look like this: (Profit-Marketing Investment-Overhead Allocation-Incremental Expenses)/Marketing Investment, with the result displayed as a percentage.
Essence of Email has registered an average of 10X ROI across all of our Managed Services clients so far. While this only pertains to email marketing, what makes it easy for you to track your ROI with EoE is that we entail a full marketing team with a single, aggregate price – creative, technical, and other costs (except platform fees) are all subsided by the price you pay for our services. This leaves you with the simple tasks of tracking the metrics, and reaping the rewards of our concerted efforts. Schedule a free consultation.
As demonstrated above, tracking your marketing dollar spend does not have to be a monumental effort, with hundreds of small glitches and problems along the way. By preparing a flexible budget and following the 70-30 rule, you allow yourself space for any problems you might encounter along the way. Focusing on multi-touch attribution and tracking the impact on business gets you a realistic overview of how your campaigns are performing, and naturally shifts your focus on the right strategy and the right moves for the future.
Finally, looking into a realistic overview of your marketing ROI helps you plan your activities for the future, putting lucrative activities front and center.
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Stefan, 27, loves beer and hard rock. Loving son and boyfriend. Selling email marketing services to people who understand how important it is to communicate with customers in just the right way.