One of the hardest yet most critical tasks a marketing agency has to do is prove their value to clients in the form of campaign ROI. Said another way, positive campaign ROI is necessary so that clients can keep justifying their marketing spend with your firm. Keep reading to learn how to calculate ROI and the best practices for maximizing ROI in order to improve client retention.
What is a Campaign?
A marketing campaign is the name given to any initiative intended to drive a specific result within a client’s target market.
Typical marketing campaigns seek to do one or more of the following:
What is ROI?
ROI is a common way to measure the success of a marketing campaign. In the most basic terms, ROI is presented as a ratio of the net gain (revenue) from a marketing activity or campaign to its cost by evaluating data-driven results. However, when it comes to marketing, qualitative ROI should also be taken into accounting when assessing the long-term impact of campaigns, especially those geared toward driving brand awareness.
When you win new clients, it’s important to establish realistic timelines for seeing results. Explain to them what long-term ROI can mean for their brand and why being too short-sighted (i.e. only focused on quantitative ROI) can thwart these efforts.
For now, let’s focus on quantitative ROI.
ROI = (Incremental Profit – Campaign Cost) / Campaign Cost
Let's look at an example. Assume you run a Google Adwords campaign for a client and the estimated spend will be $10,000. Assuming your client generates $500 per conversion, lets also pretend that they experience 25 conversions generating a total of $500 x 25 = $12,500.
Step #1: Identify the incremental profit: $12,500
Step #2: Identify the campaign cost: $10,000
Step #3: Calculate campaign ROI: (12,500 - 10,000) / 10,000 = 25%
The following are common metrics that marketers will use to gauge success when it comes to quantitative ROI:
Real-Time Analytics Inspires Client Confidence
What good is data if it’s not easy to present and digest? With the help of dashboards, agencies can give their clients any-time access to campaign performance metrics which inspires credibility -- an important hallmark of client retention. With an analytics tool like Tableau which integrates with your CRM, there’s no guesswork involved when a client checks in with you. Within seconds, you can pull up stunning reports on ROI and conversion rates.
Optimization Drives Better Results
Being able to measure ROI with confidence is only the starting point toward successful campaigns. Your next step should involve using the insights gained to optimize campaigns. For example, using an automated marketing tool like HubSpot, you can easily keep track of which channels generate the most traffic and calculate ROI for each campaign by navigating to the Sources function under the Reports tab. Armed with this data, you can then direct the client’s budget toward the best performing channels in order to maximize ROI.
As mentioned above, when measuring ROI firms must also include qualitative metrics to provide clients with a truer picture of your marketing efforts. Customer lifetime value or CLV for short, is a predictive metric that paints a picture of the total value a customer will have over the next 12 to 24 months (the average length of a “customer lifetime”). Being able to present an accurate CLV estimate against the cost of acquisition to your clients will help to ensure that marketing dollars are being spent in the right place. In other words, it ensures that marketing spend is invested on the channels that are expected to deliver the most valuable clients.
In a smaller agency, it may fall to the account executive to calculate ROI. However, larger agencies will need to a more robust, centralized system for tracking ROI that leads to consistent decision-making such as HubSpot. However, apart from automation, accounting services can help ensure you drive the results you need that will keep your clients happy.