The term Return on Investment is often thrown around in business-speak. Most people know the general purpose behind it, but how does it apply to your marketing?

Marketing return on investment (MROI) is the same as any ROI you measure. It’s an assessment of how much income your marketing spend generates. Obviously, the aim is for profit, meaning ideally the income you generate from marketing far outweighs its cost.

Here’s the simplest formula:

(Return – Investment) / Investment = ROI

In other words, the return produced by your marketing efforts, minus how much you invested, divided by how much you invested. For example, let’s say you invested $200 in a marketing campaign that produced a return of $1,000. Applying the formula from above:
(1,000 – 200) / 200 = 4

Since ROI is expressed as a percentage, you would multiply the result by 100, giving you a total ROI of 400%. Obviously, this would have been a wildly successful campaign, much better than interest from putting money in the bank, and you could increase your investment from that point.
Cool, but why is this SO important?

Four reasons.

1. It helps you make fully informed marketing decisions. Most businesses feel the immediate ‘pain’ of shelling out for advertising costs. Knowing just how much it’s bringing back in makes it much more palatable and can help you justify future investments (or not!).
2. It guides your decision-making. Knowledge is power, and knowing that something works gives you the confidence to continue, or even increase, your marketing spend. If you know this is an investment worth making, you can also start budgeting for it long term.
3. You can track your competitors’ success. We’re not suggesting donning a trenchcoat and shades and rifling through your competitors’ rubbish bins, but by using terrific analytics and market information you can understand how you, your competitors and the market is performing.
4. It’ll keep you in check. Let’s be real. It’s easy to let ego get the better of us sometimes when we see our business name in lights, but if by crunching the numbers we realise that huge billboard is doing us no favours, the MROI could be the uppercut your ego needs.
GROW NZ’s Top 2 Tips for boosting ROI

1. Understand the power of ‘one-percenters”
There’s a huge amount of profit to be made by stretching each stage of the funnel by just one more percent. One percent doesn’t sound like much, but it can really help to narrow your focus on the key areas that can result in exponential growth. Focussing on the ‘one-percenters’ certainly worked for Steve Hansen and the All Blacks, and it can work for your business too. Below is a demonstration of how a one percent shift at two stages of the marketing funnel, can have a huge impact, in this case, a whopping 240 % increase in ROI!

2. Make sure you understand the concept of customer lifetime value.

This is essentially the overall amount a single customer will spend with your business over the course of his or her dealings with you. This is especially important when your business has repeat purchases, and if your business doesn’t, this could be a significant opportunity for you.

We will be exploring customer lifetime value and tips to increase it the upcoming weeks, as not understanding how to calculate this properly could lead to poor investment decisions and restrict growth and profitability. It also explains why ‘loss leaders’ often make strong commercial sense, if you can win the customer, build loyalty and earn repeat purchases.

Finally, before you jump to conclusions…

As we alluded to in Tip 2, it’s important to remember that not all returns will be instant. Most of us want our businesses to work for us long term, so just because you’re not seeing immediate returns, doesn’t mean those efforts aren’t working.

The Harvard Business School put it well in an article featuring senior lecturer Jill Avery: “The key is to remember that while marketing expenditures hit the P&L immediately, every dollar you spend today is building your brand as an asset for the future, Avery explains. So, ideally, your marketing program is not only affecting sales and profits this year but also strengthening your brand equity and customer relationships over time.”

And I would add, what you learn from every dollar invested, should be utilised to achieve a better outcome next time.
If you’re ready to seriously up your ROI game, we highly recommend Semrush.

They offer an all-in-one multi-award-winning marketing toolkit for business.
• Using brilliant data and analytics to take the guesswork out of decision making, you can simplify your marketing routine and grow your business.
• SEMrush can help you understand the size of your market online, locally and nationally, help you manage your social media and online brand reputation and even track what your competitors are up to.
• A positive ROI on SEMrush is pretty much in the bag.
Click here to find out how SEMrush can give your business a boost.