Articles in The 'ROI' Tag

May 5 2010

Knowing the Value of a Conversion

Do you know the value of a conversion? It may seem like a basic question, but there are many factors to consider.

For example, ecommerce advertisers may determine the actual value of a conversion as the purchase price of an item. If a person buys a \$100 widget from your site, then the value is \$100. But in the real world we know there are other expenses incurred including overhead, shipping, etc.

If you are participating in online advertising, a way to calculate a value of a conversion is to look at Return on Ad Spend (ROAS). ROAS is simply dollars sold divided by dollars spent.  It means how many dollars you are getting back for every dollar you spend. Going back to our widget example, if an advertiser spent \$20 for advertising on that widget, the ROAS would be 5. 100/20 = 5.  For every dollar you spend, you are getting \$5.

Return on Investment (ROI) is another way to calculate a conversion’s value. The formula for ROI is (Revenue — Spend) divided by spend. This is a way to determine what percentage of spend you are getting back as profit. If you spent \$20 on advertising a widget that sold for \$100, to calculate ROI take (\$100-\$20)/20 * 100 = 400%.  ROI should be as high above 100% as possible. Also, remember to take the lifetime value of a customer into account when examining the value of a conversion.

Regardless of how you measure your success, the important thing is that you are taking steps to track and improve results. Making sound decisions on what efforts are working and not working will surely help to boost your bottom line.

April 29 2010

Measuring Marketing ROI Through Call Tracking

When setting up your marketing plan there are obviously different channels to advertise on, including one or a variety of online, print, radio, T.V., etc. Many ask how you can actually track the calls made to your company through your advertising efforts.

Call tracking is a great way to do this.  Through call tracking, you are able to tie incoming calls to where they are coming from, whether that is a radio or TV spot or even an ad online. Call tracking companies usually charge a monthly fee for each number you use for your campaigns; plus a small fee per minute. The call tracking companies also provide extensive reporting to the advertiser such as unique callers, length of call, leads per day, voicemails, etc. They may also include features so that when a customer calls from one of the lines, the advertiser will be notified before they actually begin speaking with the person on the other end of the line.  An advertiser also has the ability to set up a recording feature that starts every time the incoming phone calls are answered.

An advertiser can pick out one number for simplicity or multiple numbers channels where they are advertising. Below are a few scenarios of how you may want to use call tracking when you are running multiple ads in a variety of channels, such as   newspapers and magazines, online ads, and radio ads on various stations.

Scenario 1 — Purchase one phone number and use it across all of your marketing channels. This will be a measure of potential customers that have actually seen or heard your paid advertisements

Scenario 2 — Purchase different lines, one for print ads, one for online ads, one for radio, etc.  Through reporting you could see how your potential target clients are responding to the marketing channel or advertisement being presented.

Scenario 3 — Purchasing multiple lines for each marketing channel. In print for example, you might have one line for the newspaper and one for magazines, or more than one line if you are advertising in a number of newspapers. The same goes for magazines, sponsored online ads and multiple radio stations.

Call tracking is a very unique service to measure your ROI based on where and when the advertisements are running and receiving a better return on your overall investment.

February 8 2010

Is Your Online Campaign Performing?

Every online advertiser knows that search engine marketing is a contributor for generating sales, but how do you know if your online campaign is actually producing a return on investment?

Calculating your return on investment (ROI), or rate of return, is not only easy to do, but it can also help you determine how your overall campaign is performing.  ROI can be calculated by using this formula:

ROI = (Revenue – Investment) Ã· Investment Ã— 100

For example, if you generated \$3000 in revenue and spent \$150 in online advertising, your ROI would be 1,900%.

While attracting searchers to your site is important for branding your business, products and services; generating revenue is really the main objective.  That being said, it is not suggested to completely cease all branding campaigns, as these visitors may convert to customers at a later date.  Try testing different strategies such as, lowering campaigns budgets or excluding geographic areas that generate a large amount of visitors, but do not necessarily result in sales.

I have utilized these suggestions for several clients and as a result, have seen dramatic improvements in not only in the average order value and amount of sales, but more importantly the ROI.  While there is no exact formula for making a campaign perform; testing one strategy is not recommended.  You do not want to automatically deem your campaign a failure if you’re not seeing a positive ROI within the first days or weeks of beginning a new campaign. It can take time to determine which technique works best for your campaign; so keep testing and experimenting.