Marketing ROI is exactly what it sounds like: A way of measuring the return on investment from the amount a company spends on marketing.
Marketing ROI benefits any company in the following ways:
- Justifies marketing spend
- Shows what to spend on
- Compares marketing efficiency with competitors
- Holds marketing people accountable
What sort of Marketing ROI should a business expect? 9 experts tell us what is a good Marketing ROI.
What is a good Marketing ROI?
According to Neilsen, the average marketing return on investment is $1.09. So what is a good Marketing ROI and why.
‘A 5:1 ratio is in the middle of the bell curve. A ratio of over 5:1 is considered strong for most businesses. A 2:1 revenue to marketing cost ratio wouldn’t be profitable for many businesses, as the cost to produce or acquire the item being sold (also known as cost-of-goods-sold, or COGS) is about 50% of the sale price. Companies with higher gross margins (their COGS are LESS than 50% of the sales price) don’t need to achieve as many sales from their marketing before they become profitable. Therefore, the ratio is lower.” – Chris Leone, Web Strategies Inc.
Email marketing has the highest ROI
“Email marketing has the highest ROI of 675% when compared with any of the other major marketing methods. An email marketing campaign with a business’s website can be utilized to great success in order to increase sales and profits.” – Profitworks
Measure against the past
“One good way to set a “good ROI” benchmark for each marketing strategy is to look at the return from similar tactics you’ve tried in the past, as well as your current sales numbers. That information should help you create ROI benchmarks and goals that are realistic for your company. What’s considered a “good ROI” can vary based on the type of marketing strategy, your distribution channels, and your industry.” – Pamela Bump, HubSpot
Start small and scale with success
“Many entrepreneurs make the mistake of blindly spending money, hoping that cash will eventually come back and multiply. Sometimes it works. Usually, however, the entrepreneur runs out of money because he or she didn’t consider ROI. Maybe you spend $500 on Facebook Ads. You track the campaign over several weeks and discover that leads from those Facebook Ads generated $10,000 in revenue. That’s a massive ROI. Now you know that Facebook Ads offer tremendous ROI. Next time, you might spend $2,000 on Facebook Ads to multiply the potential revenue.” – Jonathan Cronstedt, Medium
Test your way to a high Marketing ROI
“Almost anything can be measured using proper test design – but note that it’s prohibitively expensive to test everything with this method. With test and control groups, you apply the program or treatment that you want to measure to one component of your target buyer group, and not to another homogeneous part of that group. All other factors being equal, you’ll be able to attribute any difference in buyer behavior between the two groups to the particular program.” Jon Miller, Marketo
Google Ads – $2 return for $1 spent
“According to research by the American Economic Association, businesses make an average of $2 in revenue for every $1 they spend on AdWords (Google Ads). However, many of them spend money on AdWords without knowing which search terms to target, what the best bid price is, or how to measure their revenue.” – MarketingProfs
KPIs with targets determine Marketing ROI
“ROI can certainly be seen as a “numbers game.” When marketers launch campaigns, they must be willing to identify the KPI’s of those campaigns in numerical terms. How much more traffic have they generated? What has been the increase in lead generation compared to that before a campaign has been in place? Companies can obsess on looking for a positive ROI in short order when, in fact, a campaign may be much longer-term before results can actually be seen. Find the balance. Set up the KPI’s, track results in real-time, eliminate those campaigns that are clearly not working, and allow those that seem to be getting results the time they need.” – Circa Interactive
LinkedIn has an average ROI of $9.59
“We looked at every paid LinkedIn touchpoint (e.g. paid social ads) across our customer base from 2017 through July 2018. We use a full path attribution model in order to give revenue credit across the entire customer journey, including marketing that happens post-opportunity creation. We look at cost data and closed-won opportunities across the same 1.5-year time span. In other words, this includes costs for LinkedIn ads directed towards leads and current open-opportunities. The average ROI for a subset of our customers is $9.59.” – Andrew Nyugen, Bizible
Facebook ads lift search ROI
“Consumers who were exposed to Facebook ads were more likely to conduct a new search on mobile. The average lift for mobile search referral traffic was 6 percent. Small businesses saw the largest variance in the lift. when people saw Facebook ads in addition to paid search results, they were not only 13 percent more likely to buy online, they were also 79 percent more likely to seek out the brand’s physical store.” – Larry Kim, Wordstream
Do these experts help your understanding and expectations of Marketing ROI? Do you need help determining Marketing ROI for your business?