Every year brings more and more digital advertising options to spread your company’s brand, products, and messaging. You can target your ads with amazing precision across a multitude of platforms. But how are you tracking the profitability of those efforts?
Hopefully, you’re already tracking the performance of your advertising in terms of delivering new leads and prospects to your sales team. But knowing how well your ads are at driving leads is only part of managing your marketing efforts. When it comes time to discuss budget justification, you’ll need to prove why your company should maintain or increase its current advertising budget — and the most convincing way to achieve this is to prove how much revenue marketing generates for the company.
So let’s get technical. Put simply, you calculate ROI by subtracting the amount spent on advertising from how much gross revenue marketing produced. To get an ROI ratio, you divide by the cost; then multiply by 100 to get a percentage ROI. But there is so much more to this formula: , for starters. The marketing department doesn’t operate in a vacuum. The entire ecosystem of the company is wrapped up in your ROI and how your campaigns perform.
We already know how to run and optimize campaigns to generate leads by leveraging your website and campaign analytics. But, looking holistically at all of your campaigns stacked next to each other for lead generation? Some of them will inevitably have generated more leads than others. Looking at those leads that came in, you’ll see how many were qualified leads, and how many of those qualified leads became closed deals. You’ll also want to look at how long it took for those deals to go from a qualified lead to a closed deal and the average size of those deals.
These pieces of data help you craft a complete, quantifiable story of how long your sales pipeline is. They also provide a robust view into your qualified-to-close rate on qualified leads, as well as how much in-lead volume you’ll need to generate to reach your revenue goals. This data-story is a powerful first step in planning for the future and determining true ROI. It identifies what is working well, what needs optimization, and what is no longer driving revenue
Other critical factors affect this process. Your sales team, for example, is basically the field testers for your marketing efforts. They’re often limited by quality of leads you send them, so it pays to focus on them with similar attention as you would pay to your marketing efforts. Proactively identify and study their reasons for dispositioning leads, and you’ll find that you may better understand your lead quality. But don’t forget: The sales team are still people. Some are more efficient at sales than others. Take into consideration if certain sales reps are more successful with leads from certain campaigns than others, then work with the sales leadership to leverage that. In many ways, the success of the sales team reflects marketing’s success in targeting advertising and driving revenue. The inverse is also true: Good marketing is perceived to be even better with the successes of a solid sales team.
In the end, it all comes down to data. Not just any data, though! If you want your data to be useful, it needs to be organized and consistent (especially if you’re using a CRM to track it). When you’re able to accurately attribute revenue to your marketing efforts and connect that with sales and funnel data, you empower yourself to find out the true return on your advertising spend — and proactively contribute to company growth.
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