Return on Investment is King

When you are planning a marketing campaign, the ultimate consideration is “What is my ROI, Return On Investment?” There are two ways in which you need to judge “return” – short term and long term.

The most straightforward short term measurement is to look at conversion rates – sales generated as a direct result of a particular campaign. How many units did I sell, at what profit, after deducting the cost of the campaign?

Think about these five criteria:

  1. Number of pieces you are mailing or e-mailing
  2. Total programme costs
  3. Response Rate: % of responses expected
  4. Conversion Rate: % of responders expected to make purchases
  5. Average profit per sale

From this you can calculate:

  1. Number of respondees
  2. Cost of campaign per response
  3. Number of buyers
  4. Cost of campaign per buyer
  5. Cost of campaign per mailing/emailing piece
  6. Total profit from the campaign in monetary terms
  7. ROI percentage

Ask us for details and we can help you calculate these numbers from your initial data. The great thing is that you can keep entering the numbers until they fit what you are looking for! This can allow you to check all sorts of assumptions and projections before the campaign goes live.

We talk about measuring response rates as well as conversion rates. Response rates are important to factor in as part of your judgement on the success of a campaign, as they show you the level of engagement and interest in your campaign, even if a sale (on this occasion…) didn’t occur.

Response rates are something you can build on with future campaigns, perhaps tweaking and varying your offer. Responses can be creating more long term benefits than the immediate kick of a sale:

  • Awareness of your business/brand/services
  • Initial interest which may lead to a sale on the second or third email/mail: most people don’t buy on first contact.
  • Click-throughs to find out much more about your products/services, beyond those perhaps mentioned in the campaign.
  • Depending on your campaign message, there could be the opportunity to send someone a sample product/free gift/business report/more info etc. They have engaged with you!
  • The acquisition of someone’s full contact data to allow you to follow them up by phone.

With the correct approach to the follow-up, ‘responses’ can lead to a high percentage of conversions. More about follow-up in a future blog…