Return on investment

The concept of return on investment has been around for a long time. Here is the simplest possible way of determining return on investment for a single marketing campaign. We've used this approach for a number of years at Blue Frog Marketing and whilst it isn't 'high science' and no where near as good as a full metrics dashboard, we find it useful in small business cases.

1. Start by collecting some baseline numbers for what you want to measure such as sales, volume, new customers.
2. Set the budget for your campaign
3. Set up front a measurement period. When you will start and stop measuring results. It is important to do this up front so you are well aware of your baseline or starting numbers and objectives before you start.
4. Run the campaign
5. Collect the new data for the measure you wanted - say new business, sales or new accounts
6. A simple return in investment measure is an ROI index which is simply money made divided by money invested. So if you were measuring sales for example you need to get this figure - let's say it was $100,000 for example.
7. Now gather direct costs of the campaign - this will be advertising, printing, mailing, etc. Let's say this cost was $10,000
8. Don't forget indirect costs such as labour - make sure you collect how many hours of your time or staff time it took to implement the campaign. So if you spent 100 hours on it and you value your time at $100 per hour then this totals another $10,000
9. Add up your indirect and direct costs which in this example is $20,000
10. Divide your sales $100,000 by your costs $20,000 and your ROI ratio is 5:1.
11. Let's say you made 50% profit on your sales - this means your final ROI ratio is 2.5:1 which means you made $2.50 profit for every $1 you invested in your campaign.

This is a very rough calculation and there are many other factors such as incremental sales to be determined - what would you have grown if you had done nothing and so forth - but for the purposes of simplicity it will help you at least determine if the campaign had an effect.