Marketing Math: How to Determine ROI of your Marketing Efforts

Nobody starts a business with hopes of just breaking even.

You want your business to be profitable and lead to expansion and success – right?

You don’t want to just live comfortably, you want to live the dream!

How does Marketing Help?

Marketing helps people (strangers, friends & family) get to know your business. You want people to know who you are and what you’re selling in order to

  1. Make prospecting easier and more efficient
  2. Get new leads and sales opportunities (from existing leads or new leads)
  3. Qualify leads for your sales team to close
  4. Make more money!

How do you know if your Marketing is Working?

Marketing should be an investment, NOT an expense. The goal is to get a return on investment or ROI for every marketing dollar invested.

The idea of investing dollars into marketing is to get back more money than you invested (whether in the short term or the long term).

As a business owner, you want to know that your marketing investment is paying off. You do this by evaluating your current situation (i.e. capturing a baseline), setting SMART goals for future objectives, identifying your Key Performance Indicators (KPI’s to make sure your marketing is on the right track) and reviewing your marketing campaigns and their results.

Setting SMART Goals

The first step in planning your marketing efforts is to set SMART business goals. SMART stands for: Specific, Measurable, Attainable, Realistic and Time-bound goals.

When it comes to the marketing and sales area of your business, you want to be able to say, “I put $10,000 into marketing my business this year and I made $20,000 in sales/revenue because of it.” Essentially in this simple scenario, you will have doubled your investment.

Figure Out Your Key Performance Indicators (KPIs)

Key Performance Indicators are the metrics (aka numbers) you identify and watch that tell you how your marketing efforts are doing.

When you’re setting your marketing goals, you need to figure out what things you need to keep track of to ensure that you’re investing wisely. Your KPIs aren’t going to be exactly the same as another business, but they might be similar. The idea is to ensure that your KPI’s are trending upward and if they fall, to be able to react quickly and make a measured decision to pivot or regroup as needed.

Here are a few KPI’s that are important to most businesses when reviewing your marketing campaigns:

  • Number of leads coming in
  • How many leads it takes to generate a sale
  • How many touch points does it take to get a lead, to get a sale
  • Number and dollar value of sales made
  • Cost of each lead gained
  • Cost to acquire a new customer
  • How many transactions a customer has with you / How often they buy
  • How much each customer is spending with you
  • Lifetime value of a customer

… and there are many many more – click here to watch a video from Brian Tracy on the numbers a business should keep track of.

Does some of these metrics and numbers sound like Greek to you? Click here for The 16 Marketing KPI’s You Should Be Measuring.

Bottom Line Metrics vs Vanity Metrics

When you’re figuring out which metrics to watch as a KPI, you need to distinguish the Vanity Metrics from the Bottom Line Metrics.

Bottom Line Metrics are things like sales made, revenue from each sale, profit per sale, number of phone calls, or emails showing up in your inbox.

Keep track of these numbers and then tie them back to which marketing campaign (or effort) lead to those sales, phone calls, or emails, etc.

Want to get an idea of how to calculate your profits? Try out this Profit Calculator from ActionCOACH.

Metrics that you shouldn’t place too much value on are Vanity Metrics:

These are the things that make you feel good, but they don’t help you reach your business goals.

As Caleb Wojcik from, “The number of your visitors, subscribers, and followers are often meaningless.” There is a fuzzier line between these metrics and the end result of a sale…

However, the idea is to make sure all of these metrics are trending up. If they should fall for some reason, you definitely want to keep an eye out for that.

Read more about Bottom Line and Vanity Metrics here.

Which Metrics Really Matter when Determining Return On Investment (ROI)?

Say you’re currently in a slump and you want to ramp up your online marketing efforts to bring in more leads and sales.

Before you invest, you need to figure out where you stand.

In terms of just digital marketing, once you know how your website, social properties, and online advertising campaigns are currently performing, you can set goals for your future online marketing efforts.

Most businesses have a website and social properties like Facebook and LinkedIn pages. If you’re really savvy, you might even have SEO and PPC campaigns.

Set Realistic Marketing Goals

If your current website traffic is 300 unique visitors per month and your website brings in 3 leads each month, you are currently getting a 1% website visitor-to-lead conversion rate.

Tactical goals could be to (increase) double your traffic and to increase your visitor-to-lead conversion rate by 100% over the next 6 months.

Using the SMART goal acronym:

1. Double Traffic to Website 2. Double Lead Conversion rate
Specific Current: 300 Future goal: 600 Current: 1% Future goal: 2%
Measurable Yes – 600 Yes – 2%
Attainable This will depend on search volume and competition online for traffic and budget to achieve this growth This is attainable as industry averages range from 1-5% or better if really dialed in
Realistic Again will depend on search volumes and existing competition and marketing budget to execute task Yes
Time-bound 6 months 6 months

So the two goals above are SMART – given that there is enough demand out in cyberspace to be able to double the traffic and you have the resources (time, money and expertise) to be able to.

Imaging increasing your traffic by 100% to 600 visitors a month – ostensibly with the same 1% visitor-to-lead conversion rate you would now be getting 6 leads every month.

Now if you also worked on increasing the conversion rate from 1% and doubling it to 2%. That same 600 websites visitors would turn into 12 leads a month!

If you’re a home building company, these 9 extra leads could mean 9 contracts for new houses, which could bring in hundreds of thousands or millions of dollars!

An unrealistic goal would be a 100% increase in leads in 1 month. Website traffic will increase when you have done great SEO, and SEO takes time to work.

With time, you could see large increases, but it’s unrealistic to think traffic will skyrocket immediately. Having monthly KPI’s and metrics that you are gauging progress against is crucial.

The key is to set yourself realistic (but challenging) goals. If there are dozens and dozens of competitors out there, it’s unrealistic to have your goal be to show up on the first page of Google’s search results. Your goals should be based on making improvements to your current status.

Here are a bunch of metrics to keep track of regarding your marketing campaigns – note each of these should be captured for every type of marketing you do and for every channel your business is promoted on (e.g. social, organic search, paid search, tv, radio, newspaper, in-person networking events, direct mail etc etc)

  • # of calls received
  • # of emails received
  • # of social media messages received
  • Total number of Lead received
  • Cost per Lead
  • # of sales generated
  • Cost per sale
  • Customer acquisition cost
  • Revenue generated
  • Conversion rates
  • ROI

Marketing Math – Summary

How did you get leads? How many sales, and from which leads? Which marketing effort brings in the most profitable lead? How many repeat sales and How many referral sales. One lead can bring in ten other customers. Are you keeping track of them?

Have SMART goals and metrics and KPIs to be able to track your goals against to make the most out of your marketing dollars.

What is a Living Website?