Marketers in survey after survey consistently indicate they are focused on measurable, ROI-driven strategies as members of the management and sales team press to know what Marketing is doing to affect consideration, preference, new customer purchases, and repurchases from existing customers. (these should be among your marketing metrics)

Basically they want to know how Marketing is impacting revenue. 

So it should come as no surprise if you are being consistently and persistently asked, "What return should we expect on that marketing investment?" That means you need to have some idea as to how you driving qualified opportunities into the pipeline.

It is possible to calculate the ROI for any marketing plan as long as you have some key pieces of information. Armed with information about conversion rates and average order values and your budget, you can determine your marketing plan's has an ROI.  Here's how you do it.

1/ The cost of everything in your marketing plan, each vehicle and program – the cost should include expenses and labor (a program may only have labor costs and if that's the case just enter this amount). If you don't know the labor costs, see if your finance team can give you an hourly rate to work from.  Itemize each vehicle and program's cost and sum the total, this should add up to your total marketing budget.

2/ For each vehicle and program determine the number of qualified impressions expected. For example, how many qualified attendees are coming to the trade show and/or webinar?  How many qualified subscribers are reading the newsletter and/or email?  If you can't quantify the expected impressions for a vehicle (some vehicles are in support of the overall program, but can't be easily quantified), use "0" as the number impressions and include its cost in the ROI equation.

Using historical data, benchmark data or your best estimate, indicate the expected number of qualified leads for each vehicle, program and the overall plan.

4/ You will need to know the following information to do the calculation:

• Qualified Lead-to-Proposal %
• Proposal to Close Deal %
• Average Order Value

5/ Now apply the following formula:

• Total Number of impressions for all programs X Expected Response Rate for all programs = Contacts Generated Per Year
• Contacts Generated/Year X Lead to Proposal %
• Number of Proposals X Average Close Rate
• Number of Closed Opportunities X Average Order Value = Expected Revenue
• Expected Revenue – Total Marketing Plan Cost = Marketing Plan ROI
• You can use this same formula as a quick way to determine whether it makes sense to implement a program. This approach requires that you have a target number in mind before you initiate any program.

Let's use a quick example.

• We'll use the following assumptions: On average 1 out of every 10 qualified leads results in a proposal; and 1 out of every five proposals/quotes results in a deal, and the average order value is $25,000.
• Let's say that all the programs in the marketing plan will cost $100,000
• Let's say the company expects an ROI of $20 for every $1 it invests.  So the company is going to expect the marketing plan to generate $2,000, 000 in revenue to stay within the ROI parameter.  Using an average order value of $25,000 the marketing plan is going to have to produce 80 customer deals.  This means the plan will need to produce 400 proposals resulting from 4,000 qualified leads.
• What if the numbers show that the plan will only produce 2,000 qualified leads resulting in 200 proposals with 40 customer deals and therefore only $1,000,000 in revenue than the plan's ROI will be 10:1?  Now you and the company can engage in a dialogue about whether this will be acceptable and if not, what changes are warranted and if so, on what side of the equation and in which vehicles and programs.

The value of this exercise is that it will help set and manage expectations.  So what is your marketing plan's ROI and is it within your company parameters? 


VisionEdge Marketing, Inc. is a data-driven and metrics-focused marketing firm that specializes in improving marketing performance and helping organizations create a competitive advantage designed to attract, secure and retain profitable customers.  Our services include marketing performance management and measurement, marketing and sales alignment, product and strategic marketing, and professional development. 

www.visionedgemarketing.com