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How Much Return on Investment are You Making for Every Marketing Dollar You Spend?

What kind of return are you currently getting for your monthly marketing expenses?  What should you be getting for your marketing dollars?  Are you tired of spending seemingly endless amounts of money on marketing dollars with no clear idea of exactly how those dollars are rewarding your business in return conversion?  These are questions that any business owner should be asking if they’re spending money on marketing.  

Marketing is an expense like any other in a business.  So why does it have to be so elusive? Any other expense can be measured against the return it brings into a business.  If you pay x amount of dollars to hire a new employee, that forty hours of time purchased can be measured in quantifiable return in business benefit.  Money spent on improving the look and appeal of an office space or practice brings a direct return in more clients or patients coming to that location.  So why then is marketing such a seemingly elusive, almost “gambling-like” expenditure?  

Marketing should generate revenue for your business.  When you spend one dollar on marketing, you should see a return in the form of increased revenue.  Marketing strategies are not only trying to increase awareness of your brand or get you exposure.  You can do that for free with social media.  Marketing on your website and through advertising needs to increase revenue.  That is its purpose.

Return on Investment is the Holy Grail of Marketing Dollars Spent

The term, “return on investment” or ROI is the keynote to any marketing strategy.  ROI is determined by two metrics, i.e. the cost to do something, and the revenue generated by that cost.  If the revenue generated by marketing far exceeds the cost of that marketing, it is a successful action.  If not, it is an unsuccessful action.

Most large, multi-million and multi-billion dollar corporations use several metrics and algorithms plus months of time to carefully study marketing ROI.  More power to them for doing so.  However, such practices are not entirely necessary for individual practices and small business approaches.  We can keep this simple by focusing on marketing cost versus the revenue generated by that cost.

What is a Good Ratio of Cost to Revenue?

A good return on investment from marketing dollars spent is five to one.  That means that every one dollar spent on marketing should return your practice or business five dollars in revenue.  A five to one ratio is considered a normal marketing return, ten to one is exceptional, and anything higher than that is rare.  A return on a marketing investment that is less than five to one is considered poor.

These ratios vary industry to industry, but they are dependable and sensible as a platform to measure marketing efficacy.  Keep in mind that it is the revenue that should be five times the marketing expense, not the profit.  The overall goal is to increase profit through marketing, but your practice’s overhead, payroll, and other business expenses will come out of revenue before profit is considered.  This is why one dollar spent on marketing needs to increase revenue by five dollars for you to see something from that.  If it doesn’t boost revenue by at least five dollars then no real change in profit will have occurred.  

w3developing at Your Service

If you feel like you might not be getting enough revenue for your current marketing spend, connect with w3developing for a complimentary website and online analysis and consultation.  We will carefully measure your current marketing strategies and advise proper adjustments to create maximum ROI on marketing expenditure.  Fill out the form to get started.