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At first glance, measuring the success of your business is easy. You are in the red or black at the end of the year. Measuring the success of each marketing program ultimately relates to the overall success of your business. If your marketing plan isn’t working, you’ll see a lot of red ink. More and more VARs are finally realizing that they must have a way to measure the ROI of each marketing program. It is no different than having a “checks and balances” system. If it works fine, why? If not, why not?
Do you really understand the meaning and value of ROI? Sure, you measure the success of your cooperative programs/Marketing Development Funds (MDF) and base your ROI on activity. You communicate your ROI through your channel partners. You realize there is a need for better ROI tracking and you want to measure the success of your business in ROI, based on revenue. He even acknowledges that you must have a way to track ROI for every program and promotion. However, at the end of the day, you may not have a clear ROI!
Why is this? Based on the constant buzz about it, we know that ROI is important, but simply attaching a way to measure the effectiveness of each program does not guarantee that it will produce clear results. Do you understand what you are (or should be) actually measuring? Have you planned and executed programs so that you can actually measure them? If you are asked to justify your programs and promotions, do you have the tools and resources to present your program goals, activities, and results in a positive light? Otherwise, you need to build something pretty quick to keep those programs out of the woodwork.
Your survival may depend on how well you can measure your success.
Here are some steps to set up a simple ROI scenario for your marketing pieces:
– Determine the cost of the individual program, promotion, brochure, or marketing item, and do this for each program and marketing piece. Include all expenses involved in bringing this program to fruition, such as labor costs and branding costs (PR, advertising, website initiatives); and costs for printing, web/email, and direct mail.
– Determine the potential number of impressions of each piece in the plan. How many brochures will you mail? How many people will receive your email? What is the circulation of the newspaper or magazine you are advertising in or sending your press release to? If you can’t quantify something, use “0” impressions, but include the cost of this in your equation.
– Calculate the response rate you could receive for each part of the program. Based on past history, you may have this information. Otherwise, take an educated guess (ie, an average of 15 percent of recipients open your email blasts). See the Direct Marketing Association’s Response Rate Trend Report for more detailed information.
– What are the annual sales of each client with you? Know the value in dollars that your client has within your company based on annual sales.
With this information, you can now create a formula based on how your program spend compares to the number of impressions and perceived response rate. Create total estimated revenue, subtract your expenses, and voila, you’ve got your ROI.