You wake up one day with a scratchy throat, a headache, and a pulsating body. You visit a doctor and pay $300 for him to tell you, "You have a common cold. Go home, rest, and drink liquids." At a stoplight as you make your way back to your bed, you think to yourself, "I paid $300 for that?!"
A Return on Investment (ROI) report is a presentation that allows decision makers in an organization to identify whether the business actions they've paid for are worth paying for again. More formally, ROI reports allow an investor to assess whether the business actions they've taken are making them a profit. For marketers, ROI reports present an opportunity to prove that their efforts are growing the customer base and adding to the overall business' profit.
Unfortunately, many marketers don't know how to put together effective and meaningful ROI reports. As a result, their department experienced funding cuts or makes poor decisions as to which actions they should repeat and which actions they should discontinue.
Here is the information ROI reports should cover if CEOs and marketers wish to understand how to grow their business and do so with strategic, iterative, and targeted efforts:
Restate Objectives
At the outset of an ROI report, state the agreed upon end goal. Ideally, an end goal should be broken down into several specific categories that consist of the various marketing channels you're using. If the person you're presenting the report to has a limited understanding of marketing and has merely asked for ROI reports that demonstrate the value of marketing, a huge part of your report should focus on defining marketing campaigns and stating their results in concrete numbers. At the outset of your ROI report, give an overview of how each campaign IS contributing to the bottom line and a goal for how much you'd like the campaign to contribute in the next six and twelve months.
For example, if you are focusing on digital marketing, and you're implementing email direct marketing campaigns, social media campaigns, SEO campaigns, and paid search campaigns, at the outset of your report you should state the metrics you're measuring for each campaign. Then state the goals you'd like to hit for each campaign over the next six and twelve months.
Present Data
Once you've detailed the campaigns you're running and the metrics you're measuring, in your ROI report, you'll need to present your progress as well as an assessment of which actions are the most beneficial to the business. This should be broken down into specific data. By measuring your actions, you can analyze what is the most cost effective.
If you're new to marketing, here are the most common ways to measure digital marketing campaigns.
Social Media
For social media, you'll want to identify which networks you're on, and what the most profitable actions are for each network. While social media is similar in many ways, depending on your industry and product or service, you will find that specific networks are more effective in driving profits.
A prospect doesn't go from a follower to a customer overnight, however, there is a process of progression that is trackable and measurable for each network. Here is an example of what to focus on in your ROI report for the most common social networks:
1. Twitter
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Total revenue generated from twitter links
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Total company website conversions generated from twitter traffic
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Total twitter reach over the course of the measuring period
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Total followers
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Total new followers in measuring period
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Average tweets per day
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Average engagement per tweet
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Average retweets
2. Facebook
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Total revenue generated from Facebook links or purchases
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Total Facebook reach over the course of the measuring period
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Total company website conversions generated from Facebook traffic
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Total fans on Facebook
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Total new Facebook fans in measuring period
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Average engagement per post: average likes, views, and comments.
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Average number of posts per day
3. LinkedIn
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Total revenue generated from LinkedIn links and purchases
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Total company website conversions generated from LinkedIn traffic
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Average engagement per post: impressions, clicks, and comments
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Average number of post per week
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Total follower count
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Follower demographics: what industry do they work in, what function do they occupy and where are they from.
You may be present on several other networks or measure several other metrics. The important aspect of your ROI report is collecting the data, presenting it, and then explaining what it means. For example, if you see a 50% increase in the number of company website conversions generated from Facebook in a given measuring period, and in that measuring period your average post per day increased by 30%, you may conclude that posting more frequently on Facebook is profitable for your organization.
The goal in analyzing metrics is to identify correlations between marketing actions to determine which actions cause an increase in prospect engagement. Ultimately, the data you collect and present make the case for exactly HOW marketing pushes prospects through the sales funnel, and how long doing so takes on average.
Direct Email Campaigns
Direct email campaigns are one of the most successful ways for a marketer to communicate with prospects and customers because the message goes directly into their Inbox. The obvious metrics a marketer should measure are the open rate (was the subject title well written), the click through rate (was the email well written), the conversion rate (was the CTA effective), and the total revenue (overall effectiveness) generated from email campaigns over the course of the measuring period.
A marketer who wishes to go into greater detail when presenting their email progress in an ROI report may break down the focus of each email campaign and compare which type of email campaign is the most profitable.
Site Performance (and SEO)
Search Engine Optimization measures how easily prospects can find a site via various search engines. It's common to combine SEO performance with site performance because one impacts the other. When presenting your site performance, make sure to present data on the following metrics:
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Total revenue generated from on-site conversions
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Total new landing page conversions
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Total site traffic in the measuring period
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Unique visits (UV)
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Total pageviews
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Bounce rates on important pages
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Average blog articles written per measuring period
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Average inbound traffic per measuring period
Paid Search
Paid campaigns are both the easiest to measure and the most important to report on because they cost money up front in addition to requiring effort to operate. They can make a huge amount of money in a short time, but likewise, they can lose money just as quickly. Needless to say, paid search is one of the easiest ways to impress a CEO, but it requires close monitoring. Here are the metrics to focus on:
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Quality score - ensures your keywords are appropriate, so you're paying for the right people versus the wrong people to see your ads.
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Click-through rate - tells you whether or not your ads are well written and relevant to searchers
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Conversion rate - identifies the number of people who made a purchase or became a prospect after clicking on your ad.
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Cost per conversion - tells you if your campaign is making you money or losing you money
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Waste spend - tells you how much money you're wasting by spending money on clicks that do not result in purchases or potential customers.
Data Analysis
Once you've presented data on how your campaigns are performing, you need to show your executive what that means in terms of the bigger picture: the overall business profitability. By analyzing your data, you can identify how much marketing is costing and how much it is bringing in. In the data analysis section, you'll also want to propose future strategies.
Here are the metrics you should quantify as you analyze your campaign data:
1. Customer Acquisition Cost (CAC)
The CAC is a cumulative cost of sales and marketing activities. It represents advertising spend, salaries, commissions, bonuses and overhead costs divided by the customers that were acquired in the given time period. This number allows organization leaders to identify how and where they can streamline costs, or how and where they may need to invest more effort to win a new customer. This calculation is especially insightful for organization leaders in industries that rely on return business to survive, like for example coffee sellers.
2. Marketing Percent of CAC
This number measures the percent of the total Customer Acquisition Cost that marketing makes up. It’s found by first calculating the marketing portion of the CAC, and then by finding the percentage that marketing makes up. This number is important for leaders to observe over time. As it fluctuates, it indicates that a marketing strategy has changed, and that marketing’s efficiency is shifting. By presenting this number in a ROI report, marketers can clearly demonstrate the value of investing less versus more in their department.
3. CAC as A Ratio of Customer Lifetime Value (CAC: CLV)
The Customer Lifetime Value is found by estimating the recurring value of a customer based on the repeat revenue stream they’ve contributed over the course of their relationship with the business. Once the value of a customer is estimated, the ratio can be calculated. This number represents the return on investment for the marketing department. A good goal to aim for is 3X, but different industries may vary.
4. Marketing Originated Customer Percentage
This percentage is important to calculate because it’s often higher than sales departments suspect. You can find the number by looking at the total number of customers in a given period that marketing touched in any way, shape, or form. It helps leaders get an idea of what their customer base would look like without the efforts of marketing.
Be Organized and Clear
The trick to creating an effective ROI report is to be transparent and organized. Measure everything, and present your findings with thoughtful analysis. Don’t shy away from numbers, because that’s what will move your organization’s leaders more than vague explanations. Good luck!
Is this all kind of confusing to you? No worries, contact us today and we can explain it in greater detail!
