When it comes to marketing, ROI should be one of your top concerns — if you’re not tracking it, you have no clue how well it’s working. And if you have no clue how well it’s working it definitely isn’t adding value to your business.
See, marketing is an investment, and for most businesses, it’s a big one. Sure, there are some marketing tactics that are more difficult to track than others, but for the most part, marketing should be paying for itself — just like any good investment.
The question is this: how much is the return on each of your marketing investments? Which one is performing best? Which is performing worst?
Are you putting your dollars in the right place?
Why ROI Matters so Much
Many businesses spend 10%–20% of their revenue on marketing each year.
If you’re putting that much money out there, and it seems to be working, that’s great…
But what if it could be working a whole lot better?
Or what if you’re spending money on marketing that’s just barely performing…
Instead of marketing that could be giving you way more bang for your buck?
The only way to know is to calculate the ROI for every tactic. Sometimes this takes a lot of work — you have to crunch some numbers, and you have to know where to look for those numbers in the first place.
But once you have those numbers, you might be shocked at what you find.
At a bare minimum, if you start tracking everything, you’re going to almost immediately see what’s working and what’s not.
And you’ll probably move some money around as a result.
Look, you have a goal for your business — every business owner does. Growth is usually a big part of that goal, if not the entire point of the business. If you’re spending a bunch of money on marketing with the hopes of growing, and you’re not growing the way you’d like, the answer might not be to funnel more money into marketing.
It might just be to move the money around.
Stats You Should Be Tracking
Here are some of the most important stats to track to figure out how your marketing is performing:
- Customer lifetime value
- Cost per acquisition
- Repeat purchase rate
- Customer retention rate
- Customer satisfaction – Net Promoter Score
- Conversion rate
Customer Lifetime Value
Customer lifetime value (CLV) is so incredibly important — it helps you understand if you’re spending enough money (or too much money) on your marketing efforts.
CLV is going to vary by product and service, and it’s heavily affected by customer satisfaction and retention rates. CLV doesn’t mean much if you’re not able to hang on to that customer.
Cost Per Acquisition
How much does it cost you to get a customer? How does this vary from one product or service to the next? Like everything else on this list, it depends heavily on the industry you’re in and the product or service you provide.
This can also help you understand which marketing tactics are working best. If your CPA through Google Ads is $100 but your CPA through radio ads is $150, you might pull back on radio ads and push more into Google.
Repeat Purchase Rate
How often are people buying their products from you? As mentioned, this will have a heavy impact on your CPA.
Ask yourself if there’s a way to increase this rate. Just look at Apple — they put out a new iPhone every year practically, but no one really needs a new phone every year.
But they buy them anyway.
Customer Retention Rate
Your CPA stops mattering so much if your retention rate is really high, especially if you’ve got subscription services or other repeat purchase options for your customers.
In most cases, getting a new customer costs somewhere from 5x to 30x the cost of retaining an existing customer.
It should be one of your highest priorities.
Customer satisfaction affects everything. You can’t make everyone happy, but the happier customers are, the more likely they are to stay customers, recommend your business to others, and leave good reviews (which are basically the same thing).
High customer satisfaction is correlated with high customer retention, high repeat purchase rate, and high customer lifetime value.
How well are your marketing efforts converting? A conversion is just when someone takes the action you want them to take.
For example, on a Google Ad, a conversion might be to make a purchase at your shop, or it might just be to visit your website.
For in-person sales, a conversion is just a sale. For a radio ad, a conversion might just be someone making a phone call or coming into the store.
Conversion rates need to be compared to the cost of a marketing initiative. If you’re spending tens of thousands of dollars on Google Ads, a low conversion rate is probably unacceptable. But if you’re spending only a handful of dollars on it, and those conversions are worth a lot, then it might be fine.
ROI Matters and Keeps Your Business Healthy
The Marketing ROI Calculator will help you determine exactly what your ROI is for everything you’re spending money on.