How To Calculate ROI on a Marketing Campaign
Ever asked the question, how to calculate ROI on a marketing campaign?
Engaging in an Adwords Agency in Perth as part of your marketing campaign to bring awareness to your business and its offerings can feel like going to the gym for the first time. You know that different activities work for different muscle groups, and you need collective strength for overall health.
A marketing campaign is like taking your business to the gym - it needs a mix of how you engage your core customers in person, over the phone, and online.
FOCUS ON BOTH SHORT TERM AND LONG TERM ROI
A solid marketing campaign will have an end goal in mind, including a time frame. Short term may be associated with a promotion or brand awareness, whereas long term may be focused on authority or market place position.
Cost Per Click (CPC) marketing campaigns (great for specific products or services) is a great short term investment, while an SEO strategy is great for the long term (think hitting top of the search page).
Let’s take a look at the Cost Per Click (CPC) Campaign Metrics first.
CAMPAIGN METRICS - WHAT IS COST PER CLICK VS COST PER RESULT
Cost Per Click (CPC), in simple terms, looks at the cost of a prospective customer clicking on your ad to learn more about the products and services you have to offer.
Developing a CPC (or Pay Per Click - PPC) campaign takes customer knowledge and keyword research to help your ad be seen depending on the associated keyword bid.As an example, if you were a Perth mechanic near the CBD offering wheel alignments, you could bid on a longtail keyword “where can I get a wheel alignment near me”, or “wheel alignments near Perth CBD”.
Cost Per Result is what you are wanting to achieve from your campaign, This becomes a component of serving your customers. Results for businesses may vary, which is why it is important to reach the right customers with the right products and deliver them in the right way to protect and grow your profit margins
A Cost Per Result may look like this:
- A customer calling a meeting to learn more about your offer (the result is a lead)
- A customer booking a wheel alignment (the result is a sale)
- A customer purchasing an associated product from your online store (the result is a sale)
- You want prospective customers to read why wheel alignments are important content (the result is brand awareness)
CPC is one component in the result, so it becomes part of your budgeting factor as you decide on your ideal cost per result to make your investment worthwhile.
If you have a human element (say time on a sales call) to convert a client, that needs to be considered, similar to if you are selling a product with a low-profit margin vs. a high-profit margin, you want to be investing in areas where your spend is worthwhile, then it’s time to look at your Ad budget.
HOW TO CALCULATE ROI ON GOOGLE AD BUDGET.
With Google Ads, you will get instant results, (unlike older marketing methods like print media, radio or television) so you can calculate your ROI on a marketing campaign easily, and see which keyword bidding strategies are working. This enables your ads to be optimised so they work more effectively for you - (just a little more affordable than being featured in a letterbox drop that may head straight to the recycle bin, and not even reach the eyes of your ideal customer).
Breaking down the ROI on Cost Per Click
Your goal may be to get a minimum of 100 new customers to book a wheel alignment on their car valued at $200.
Your Google ad budget may be $100, and you get 1000 clicking on your ad to find out about you.
Out of the 1000 clicking, 20 customers book a wheel alignment through your lead page.
This makes your Cost per Click 10 cents per click, and your cost per result $5 per customer conversion.
If we were talking about ROAS (Return on Ad Spend), the formula looks like this:
ROAS = Revenue generated/ Cost of Ad Campaign
With a total sales for your campaign at $4000, and your cost of ad campaign being at $100, that is a ROAS of $40 generated for every $1 spent.
ROI goes Deeper
It takes into account more than your ad spend, and factors in the costs to produce your product or service, so that your investment benefits the right area of your business.
In the wheel alignment example sales for the campaign are $4,000, and it costs are $75 in labour and overheads to complete each wheel alignment.
calculate ROI on a marketing campaign is as follows:
Revenue- cost of goods sold/cost of goods sold.
= $4000 - ($100+($20*$75)/($100+ ($20*$75)
Your Return on Investment is 150%
BUILDING AUTHORITY AND OPTIMISING
If you don’t hit your customer target in month one, don’t stress. It will take time for customers to become familiar with you.
Authority can take up to three months to build. Customers look at recommendations, testimonials, your brand personality, knowledge and consistency of content on your site.
At Dilate, we can help you combine a Facebook ad strategy and an SEO strategy so that you can compare your return and understand where your customer results are coming from digitally in the long and short term.
WHAT ABOUT THE ROI FROM SEO - ISN’T ORGANIC TRAFFIC BETTER?
In the perfect world, your ideal customer would go to Google, type in the product or service they are looking for, that you also sell, and you would appear at the top of the search engine results page (SERP).
Bingo. Free. Organic. Traffic. The digital marketing customer generating wonderland.
TO GET ORGANIC RESULTS, YOUR WEBSITE NEEDS MORE THAN A PRETTY FACE.
It needs an SEO strategy which comes from consistent, high-quality searchable content that your customer is looking for, and that comes from several digital touch points on your website. Links, Blogs, Images, Videos, Customer testimonials - All the content that helps you claim the top spots when customers start their catch cry of “Hey, Google”.
ROI IS THE LONG TERM GOAL FOR SEO
Just like any good fitness goal - it’s not going to happen overnight. But it will happen.
Six months of consistent high-quality content going out on your website is a good timeframe to work with.
Partnering with our team of Adwords Perth specialists for an SEO marketing campaign is about generating more “free” traffic so that you don’t end up paying per click, as you start to naturally rank higher in organic search results.
As your marketing agency, we want to see you do well. Our agency includes access to our inhouse creative team who deal with graphic design through to content and copywriting to help your business optimise over the longer term.
HIGHER SEARCH ENGINE RANKINGS = MORE WEBSITE TRAFFIC = MORE CUSTOMERS TO CONVERT
The beauty of an SEO marketing campaign is that you have a longer time frame to calculate your ROI, meaning that if you are looking at longer-term performance measures in your business, it can make annual budgeting and reports a little easier.
To calculate ROI for an SEO marketing strategy, the following formula is used.
(Sales gained from the investment - cost of investment)/ (cost of investment)
As we are talking organic results, this would be the organic uptake of customers sales (not from a click-through AdWords campaign), less the management fee associated with the SEO strategy divided by the management fee.
WHICH IS THE RIGHT INVESTMENT FOR YOUR RETURN - COST PER CLICK, OR SEO?
It all comes back to your marketing goals - both in the short term and long term.
A Cost Per Click return on investment may be the right measure for a specific, product or service based result where you are wanting to generate awareness, sell offers or products, or even test a new concept with customers.
SEO is a longer-term strategy and may suit your marketing objective where you are wanting to hit the top of the search results and generate organic customers in the long term.
WANT TO HIT THE ROI SWEET SPOT COMBO ON YOUR MARKETING CAMPAIGN?
It’s not a one size fits all. It is about finding the right investment combination to hit short and long term goals. To find out more about which campaign suits your goals, why not set up a meeting with one of our team members to help your customers find you easily online.