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8 surprisingly simple steps to calculate ROI 0

Posted on March 20, 2017 by Rob Petersen

roi

ROI (Return on Investment) is the basis from which informed investment decisions are made.

The ROI formula only requires two numbers; the cost of your venture and the return made from that venture. But there are inputs that go into each. For many, this is where the simple gets complicated. But it doesn’t have to be?

Here are 8 surprisingly simple steps to calculate ROI.

STEP #1: START WITH A BASELINE

roi baseline

Return from a new venture has to first take into account what occurred before. So you have to establish a baseline. In our experience, there are only three baseline scenarios. In Scenario #1,  the venture is just beginning so there is no baseline. There is a clean slate. In Scenario #2, the new venture is trying to change just one area of a company’s operations (e.g. digital, call center, human resources). The baseline in this case is the return in this area from prior period. In scenario #3, the venture involves a change or transformation in the company that likely to impact a number of areas. For example, a business generates revenue through a sales force, call center and website. They are investing in digital operations by upgrading the website, building a mobile app and improving the online selling infrastructure so they can spend less in other areas. In this instance, the baseline is the amount the website generates currently based on a total percent of the company’s operations.

STEP #2: DECIDE IF RETURN IS REVENUE OR PROFITS

roi profit or revenue

Be clear at the outset how you will measure the return in dollars. Is it revenue (sales) or profits? The latter in many cases is the most desirable measure. But it is harder to understand and control. For example, a company produces a food product. Profits requires a knowledge of the cost of goods, shipping and retail allowances. These are often hard to know now and harder to predict in the future. Because revenue has more factor within a company’s control, it is generally easier to forecast. While some insist profits is the way to go, in our experience, revenue is also is a good indication of success and basis for decision making.

STEP #3: DETERMINE THE TIME FRAME

ROI time frame

Before you can determine the return, you have to know how long it is going to take. In most cases, the time frame for ROI is between one and two years. This is due to: 1) Functional activities like the time it takes to create and build new assets (e.g. website, data center and buying infrastructure) and 2) customer uptake for awareness, consideration, trial and repeat purchases. To help understand customer uptake, it helps to know the buying frequency and Annual Customer Value (ACV).

STEP #4: DECIDE INPUTS FOR THE RETURN

roi return

The return is a prediction or forecast of what will occur by the end of the time frame. Use real company data, not norms or averages, unless you want normative or average results. Basics that are usually included in returns are how many new vs repeat customers are expected? What is their Annual Customer Value? If there is a digital component, what are visits and conversions rates to the website? If a company transformation is expected, operating costs in other areas that will decline as new capability are built can be a factor. There can be a few to many input. Confidence in the data means reliability in the return.

STEP #5: IDENTIFY THE INVESTMENTS

roi investments

In some cases, this is self-evident. But not always. Let’s say a major investment in infrastructure is occurring that will take a couple of years but the ROI time frame is one year. The investment is based on cash flow and what is spent in that year.

STEP #6: CALCULATE THE ROI

roi calculation

The ROI formula is: Return – Investment/Investment X 100%. The ROI is expressed as a percent. That’s it. Here is the formula and a sample calculation.

STEP #7: GUIDE WITH KPIs

roi & kpis

An ROI is a forecast of a result to occur in the future, a scorecard of key metrics is developed to keep ROI on track. These are Key Performance Indicators or KPIs.  A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. To keep the ROI on track, KPIs are an actionable scorecard. Variables that figure into the return like returning customers, new customers, annual customer value and conversion rate might also be KPIs. Here is what a KPI scorecard looks like for a new digital marketing venture.

STEP #8: ALIGN WITH DESIRED GOALS

roi & goals

ROI is key to evaluating how realistic is the business objective and financial goals for a company. In the ROI calculation above of 238%, the company is expecting a return of $2.38 for every dollar invested. The company has to decide how if realistic this is. It is if the company has the commitment and deliver on their plan and measure success. It probably isn’t if they don’t. But now they have a basis for evaluation. Otherwise, the company is just guessing.

Do these steps to calculate ROI sound simple and sensible to you? Do you need help figuring out ROI at your company?

7 KPI dashboards that are scorecards to success 0

Posted on December 06, 2015 by Rob Petersen

 

 

KPI Dashboard Executive

Key Performance Indicators (KPI) are measurable values that demonstrate how effectively a company is achieving key business objectives.

Organizations use KPIs to evaluate their success at reaching targeted goals. KPI dashboards are actionable scorecards to keep the business strategy on track.

Good KPI dashboards:

  • Relate to the business objective
  • Give a snapshot of the entire business
  • Are a finite number of metrics that all have targets relating to the business objective
  • Present the opportunity for further segmentation on a key metric
  • Deliver insights
  • Present business recommendations
  • Inspire action

What are examples? Here are 7 KPI dashboards that are scorecards to success.

MARKETING ROI

KPI Dashboards Marketing ROI

Return on Investment is one of the most sought after goals for any company. This dashboard from Klipfolio is a great example of marketing accountability to deliver new revenue and new customers through a new marketing campaign. It’s simple, clear and transparent. It gives an up to the minute snapshot of the key metrics that impact this business objective.

SALES

KPI Dashboards Sales

Sales are one of the objectives that KPI dashboards are often built around. This KPI dashboard from Find Examples does an excellent job of demonstrating the actionable nature of a KPI dashboard. By just looking at it, any sales or management team is able to see if the company is on track to deliver its objective; what tactics and working and who are the most likely opportunities. If the company in this example acts regularly on these results, it’s easy to see how much more likely they are to be successful.

NON-PROFIT

KPI Dashboards Non-Profit

This dashboard is for the Indianapolis Museum of Art from Avinash Kaushik. It provides not only a complete snapshot but shows the importance text can provide in a KPI dashboard. In this example, the metrics that are most important to the successful operation and growth of the museum are listed. But there is also the opportunity to provides comments, insights and recommendations through the text box. So the dashboard is a living tool that promotes action.

RESTAURANT BUSINESS

KPI Dashboards Restaurant Business

60% of restaurants fail in the first year according to Cornell University. It seems like the hospitality industry would benefit from KPI dashboards like this one that gives a great snapshot of sales, customer acquisition, cost of goods, menus, key stores and competitors’ pricing at a glance. This is a comprehensive look at a highly competitive industry.

WEBSITE

KPI Dashboards Website

This dashboard of a website’s performance gives all the vital data, a full analysis with trends, insights and recommendation. It provides great perspective while clearly presenting a point of view for improving performance.

GLOBAL PRODUCTS

KPI Dashboards Global Products

A company that has products available globally with different business performances in different parts of the world has specific global goals. Success involves market development, product mix or whether or not customers buy online or offline. This dashboard from Sharepoint gives executives a perspective and uses traffic lights as icons to highlight products doing well or needing attention.

C-SUITE KPI DASHBOARD

KPI Dashboards Executive

A clear picture of the data doesn’t mean there needs to be a lot of it. But enough to clearly make your point. You also have to tell people what to do with the data. This dashboard for Avinash Kaushik, Digital Marketing Evangelist at Google, is made for C-Suite presentations. It takes the key data findings and, in a text box, presents the insights, actions and financial implications. It’s complete, concise and delivers on one of most important criteria for creating KPIs – taking action.

Do these examples help explain the value of KPI dashboards? Do you see one that is relevant to your business? Does your company need help creating KPI dashboards for your business?

 

10 case studies where web analytics insights drove ROI 0

Posted on August 09, 2015 by Rob Petersen

 

 

web analytics

What good is data if you don’t know what to do with it?

Web Analytics is the measurement, collection, analysis and reporting of internet data for the purposes of understanding consumer behavior, improving user experience and optimizing web usage.

This might sound intimidating to some but the reason why companies do web analytics is simple: To find insights that help make better business decisions.

Who does it well?

Here are 10 case studies of companies that used insights from web analytics and drove ROI.

  1. BT FINANCIAL GROUP: Is a leading provider of superannuation, investment and insurance products. The BT website focuses on service and usability with an online application form as one of the key conversion points. Landing pages with different combinations of the design elements for testing are created to optimize the user experience and maximize conversions. With conversion testing, BT increases form completions by more than 60%.
  2. BUILDDIRECT: Does business in more than 100 countries with an expanding portfolio of building materials. Though the company is growing rapidly, management is eager to improve the efficiency of its online spending. Through web analytics, BuildDirect finds home buyers who purchase a sample have a 60% likelihood of returning to the site within the next 30 days and placing a full order,  BuildDirect uses GA’s A/B testing capabilities to perfect its marketing approach. With insights from web analytics, BuildDirect increases sales by 50%.
  3. HARVARD UNIVERSITY: To expand the digital reach of two established schools, Harvard Summer School and Harvard Extension School, Harvard ran a 12-month SEO and PPC campaign. They use web analytics as an audit to identify technical setbacks, content positioning, to create new landing pages for search traffic, and top-of-funnel paid search awareness campaigns. The result are: 1) 89% increase in visits from organic search, 2) 75% increase in registrations from organic search, 3) 30% increase in CTR with AdWords and 4) 124% increase in ROAS with AdWords.
  4. KEEN FOOTWEAR: Is an outdoor shoe manufacturing company based in Portland, Oregon. The company needs a better way to measure, analyze, understand metrics that mattered on their social network provide meaningful insight. A framework involving reach, engagement, influence, sentiment and effect is developed. Key Performance Indicators (KPIs) within each area are established. Using the metrics: 1) Page Likes increase by 92%, 2) Post Reach increase by 342%, 3) Post Engagement increase by 137% and Active Users increase by 213%.
  5. MOTOREASY: Is a company that sells extended auto warranties. Motoreasy’s Web site is re-designed to give you a quote for an extended auto warranty on your car. This involves: 1) Tell people what you want them to do (fill in the form) and 2) tell them the benefits of doing so(you’ll get a quote which could save you money). The telephone number is featured prominently at the top, making it easy for them to call if they found filling out the online form too tedious.  These changes reduce the drop out rate from 65 percent to 29 percent overnight. This increases the completion rate of the sign up page from 31% to 69%.
  6. NIKE GOLF: Is the golf-specific retail branch of Nike. Although there is the benefit of the Nike brand, there is also the lack of a focused keyword strategy on the Nike Golf website. It is very difficult for search engines to crawl for content. Research helps make decisions like whether target keywords should be “golf apparel”, “golf clothing”, “golf clothes” or “golf sportswear.” As a result of the research, Nike Golf sees a 169% in total increase in organic search traffic.
  7. ON THE BEACH: Offers value for money flights and hotels to the world’s most popular beach holiday destinations, providing consumers with a huge selection of travel products, including 50 million airplane seats and more than 30,000 hotels. On the Beach finds that their generic search is undervalued under last click reporting, a discovery that allows the company to build a custom attribution model and increase budget on generic campaigns. This helps drive a higher volume of site traffic, holiday sales and market share in the travel sector, which in turn led to a 25% increase in ROI.
  8. PBS: Helps individual PBS producers and local PBS stations create and promote each section within PBS.org. PBS wants to develop a coordinated approach to analysis and reporting that would inform their future strategic decisions. Analysis of search engine trends leads to an increase in PBS traffic by 30%. Web analytics is set up to allow PBS to evaluate the way users consumed video. As a result, PBS increases both conversions and visits by 30%.
  9. PUMA: Has rich, dynamic web site; but, just as PUMA constantly improves its products, it also believes in making site changes that help visitors easily achieve their goals. While testing its web site header, it finds a variation that increases online orders by 7.1%. Puma more than doubles the amount of time visitors spend interacting with PUMA brand content, such as news, videos, and photos. It results in 47% more traffic.
  10. RYANAIR: Is Europe’s largest low fare airline. 99% of Ryanair’s bookings are made through its website making it the company’s single most important marketing tool. Web Analytics helps understand email and visitor behaviour. Ryanir is able to increase click-through rates by 200%, decrease bounce rate by 18%, increase visitor traffic by 16% to strategic pages and double revenue generated from their email campaigns.

We, at BarnRaisers, are big believers in how data-driven results helps make better business decisions. Helping companies connect the dots between strategy, execution and results is a big part of what we do.

To these case studies help you see how insights from web anlaytics can drive your businsess’ ROI?

 

10 essential KPIs for 7 different industries 0

Posted on July 13, 2015 by Rob Petersen

 

 

Key Performance Indicators (KPIs) are metrics tied to a target.

They are the measurable values that demonstrate how effectively a company is achieving key business objectives. KPIs operate as the actionable scorecard that keeps the strategy on track.

The video above from  Erica Olsen of OnStrategyHQ.com shows how to develop KPIs and set up a KPI scorecard.

But KPIs differ depending on the objectives and type of business and industry. For example, if a business relies on marketing, or a sales force, social media, SEO or financials to achieve objectives, there will be different KPIs. The same can be said if a business is retail or pharmaceuticals.

What are the most important KPIs for your business? Here are 10 essential KPIs for 7 different industries.

MARKETING KPIs

  • Incremental Sales
  • Incremental Profits
  • Website Traffic
  • Bounce Rate
  • Audience Segmentation
  • Acquisition by Channel
  • Goal Completion Rate or Conversions
  • Cost per Acquisition
  • Social Interactions
  • Return on Investment (ROI)

SALES KPIs

  • Sales Growth
  • Sales per Rep
  • Number of Leads
  • Cost Per Leads
  • Product Performance
  • Average Purchase Value
  • Quote to Close Ratio
  • Usage of Marketing Collateral
  • Clicks from Sales Follow Up Emails
  • Social Media Usage

FINANCIAL KPIs

  • Working Capital
  • Debt to Equity Ratio
  • Accounts Receivable
  • Accounts Payable
  • Inventory Turnover
  • Gross Profit Margin
  • Net Profit Margin
  • Budget Creation Cycle Time
  • Reports Produced per Financial FTE
  • Finance as % of Revenue

SOCIAL MEDIA KPIs

  • Content Rate
  • Keyword Frequency
  • Average Response Time
  • Fans and Followers
  • Audience Growth Rate
  • Potential Reach
  • Share of Audience
  • Share of Engagement
  • Influence Score
  • Sentiment

SEARCH ENGINE OPTIMIZATION (SEO) KPIs

  • Priority Keywords
  • Keyword Monthly Search Volume
  • Keyword Ranking
  • Keyword Click Through Rate
  • # of  Inbound Links
  • # of Indexed Pages
  • Domain Authority
  • % of Website Traffic from Organic Search
  • Bounce Rate of Organic Search
  • Goal Completion Rate from Organic Search

RETAIL KPIs

  • Incremental Sales
  • Customer Acquisition
  • Customer Retention
  • Goal Completion Rate or Conversions
  • Average Customer Value
  • Website Traffic
  • Bounce Rate
  • Point of Purchase
  • Cost of Goods
  • Social Interactions

PHARMACEUTICAL KPIs

  • % of Doctors who are Aware of Brand
  • % of Doctors who are Willing to Prescribe Brand
  • Target Price vs. Actual Price
  • Reimbursement
  • # of Key Opinion Leaders (KOLs)
  • Promotion Expenditures
  • Brand Share of Voice (SOV)
  • Unaided Brand Awareness
  • Unaided Recall of Brand Message
  • Incremental Rx’s

These diverse areas have been examined to demonstrate how important the objectives and industry are to the selection of KPIs.

Did they convince you of the importance of KPIs for your business? Were they relevant to your business? Do you need help determining KPIs and setting up a KPI dashboard for your business?

10 data experts explain why little data is the new big data 0

Posted on February 22, 2015 by Rob Petersen

 

 

little data vs big data

  • 91% of marketing leaders believe successful brands use customer data to drive business decisions (source: BRITE/NYAMA)
  • 90% of the world’s total data has been created just within the past two years (source: IBM)
  • 87% agree capturing and sharing the right data is important to effectively measuring ROI in their own company (BRITE/NYAMA)

These facts say loud and clear companies believe data helps them make better business decisions.

Big Data is a broad term for data that comes from places like web browsers, social networks, census, surveillance and sensors. It’s stored in computer clouds, and searched for patterns, predictive analytics and insights.

According to IDS, in the next 12-18 months, organizations plan to invest in skill sets necessary for big data deployments, including data scientists (27%), data architects (24%), data analysts (24%), data visualizers (23%), research analysts (21%), and business analysts (21%).

But is bigger better?

Here are 10 data experts who explain why little data is the new big data.

  1.  “Big data has been hyped so heavily that companies are expecting it to deliver more value than it actually can. The exception. Companies that have a culture of evidence-based decision making, tend to be more profitable than companies that don’t have that kind of culture.” – Jeanne W. Ross, Cynthia M. Beath and Anne Quaadgras, Harvard Business Review
  2. “What we track determines where we focus and what we are motivated to improve. Why do people obsess over LinkedIn Connections or Twitter followers?  SAT scores, golf handicaps, or even gas mileage? Because they are observable metrics that are easy to compare. Before you obsess over a particular metric, make sure it’s the right metric to obsess over.” – Johan Berger
  3. “How to beat the big data giant? Start by thinking little data, as in David vs. Goliath. The first step in the little data process is to identify key business objectives that your organization would like to have data solve. Make big decisions and eliminate the need to capture and manage the irrelevant data within the 2.4 quintillion bits of digital data generated each day from the big data stream.” – Gary Drenik, Forbes
  4. “Size in itself doesn’t matter – what matters is having the data, of whatever size, that helps us solve a problem or address the question we have. For many problems and questions, small data in itself is enough. The data on household energy use, the times of local buses, government spending – these are all small data.” – Rufus Pollock, Open Knowledge Foundation
  5. “Corporate decision-makers often would be better served if they rely on tried-and-true tools and systems from the world of Little Data, rather than illusions from Big Data. Sampling theory teaches that if the sample is random, one can measure the behavior or mood of the whole by talking to very few people. A sample of 1,500 is sufficient to predict who will win a presidential election. A sample of 200-300 respondents is generally sufficient to predict how much the whole population will like a new product or service.” – Jerry W. Thomas, Decision Analyst
  6. “Big Data is what organizations know about people — be they customers, citizens, employees, or voters. Data is aggregated from a large number of sources. Little Data is what we know about ourselves. What we buy. Who we know. Where we go. How we spend our time. Without Little Data, Big Data has a tendency to become Big Brother. We’ve all experienced that unsettling feeling when ads follow us on the web.” – Mark Bronchek, Harvard Business Review
  7. “Log daily. Reflect quarterly. Plan yearly. This simple model can provide the data and structure you need to take control. Your yearly reflection will provide you the insight needed to make clear, data-driven decisions.” – John Caddell, author The Mistake Bank
  8. “Big data’s little brother is ‘small data’ or traditional KPIs (Key Performance Indicators) that help to measure success in companies. Any data, and in particular ‘big data’, only becomes meaningful and relevant in the context of the business success, measured by KPIs.” – Bernard Marr, Advanced Performance Institute
  9. “Little data constitutes the nuts and bolts metrics of running a business. For a Web property, that means getting a handle on issues such as the bounce rate, SEO session starts, social session starts, funnels of how users flow through a property, and page views per session. Too many people lose sight of these simple but critical metrics.” – Peter Varad, Cnet
  10. “So if you’re wondering whether to use big or little data, fuhgetaboutit. Instead you should be wondering whether your company is good at using data period. If it isn’t, then that’s the battle you should fight.” – Pam Baker, Fierce Big Data

Is your company good with data? Let us help your company get there. Or consider taking a Digital Marketing or Social Media Mini-MBA at the Rutgers Business School Executive Education where I teach Web Analytics and ROI for Better Decision Making.

Do you think little data is the new big data? Which is going to help you company make better decisions?

 

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    BarnRaisers builds brands with proven relationship principles and ROI. We are a full service digital marketing agency. Our expertise is strategy, search and data-driven results.



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