ROI, or return on investment, is an essential part of marketing because it allows you to see which areas of your strategy are working, and which are not.
If you’re a small business owner, it’s imperative to know exactly where your customers are coming from. This is the only way you can tell if your marketing is working.
The areas where you’re seeing a great return are where you should continue to pour your budget into. For example, if you’re reaching more customers by using social media giveaways on Facebook and Instagram, you should continue to invest time and money into building up your presence on those platforms.
To track your ROI, it’s crucial to communicate with your customers and ask what brought them to you. There are several ways I recommend doing this: You can create a simple form that a customer must fill out when they visit your website, or, you could ask your receptionist to ask each customer who walks in how they heard about your business and record their answers on a Google sheet. These simple practices aren’t time-consuming but can be a game-changer in your business.
When you talk to customers directly and ask them how they found you, you’ll no longer waste money by guessing which marketing strategy you’ve employed made them choose your business.
It’s also worth it to consider those in your network who may be referring business to you. Are there friends or former colleagues of yours who are sending customers your way? Connect with them and find a way to thank them for the extra business. At D2, we pay our referral partners $500 per referral. It’s a high amount on purpose — it’s a small gesture to thank them for trusting D2, and most of the time, they’ll continue sending us business.
If you’ve never tried tracking your ROI before, now is a good time to start. In this day and age, we have so many different channels for reaching new customers: social media advertisements, Google campaigns, influencer marketing, print advertisements, billboards … the list goes on!
Here’s how I recommend keeping track of your ROI:
Take the sales growth from that business or product line and subtract the marketing costs from that number. Then, divide that number by the marketing costs. Multiply that total times 100. For example, if your sales grew by $1000 and you spent $100 on marketing, you’d end up with a total ROI of 900%.
ROI is so important because it removes all of the guesswork from your marketing. It can also be useful for other areas of your business, like calculating the return on investment for a new employee or a new software purchase.
It’s important to point out that your marketing ROI should be calculated every month, but it can also take months to see a return. For that reason, you can’t use a new marketing strategy for one month and then cancel it when you don’t see a return.
I usually advise people that three months is the minimum time you need to track ROI and see how your marketing is performing. After the three month mark, you should start to see your stats trending upwards and your campaign is gaining traction. It might take a few more months to see a complete ROI, but if you’re trending in the right direction, you’re on track to success.