Oct
22
2009

What’s The ROI on Knowing Your ROI?

ROI Scenario's

Figure A

What is it worth to you to know your advertising and marketing ROI?  I bet it’s worth more than you realize.

Do you know what the response is from your current marketing and advertising?  If not, would you like to know?  Let’s say you are spending $1,000,000 on marketing and advertising each year.  At an average $10 CPM (cost per thousand impressions), and a response/lead generation rate of 0.25%, this yields 50,000 responses/leads.  See Figure A.

Suppose you convert leads to sales at an average rate of 20%.  Using an average profit per sale of $10.00 after factoring in all costs, you made $500,000 in profit.  It’s all in a day’s work.  Right?  While these numbers are not based on an actual company, you can insert your company’s marketing spend, all other costs, response and conversion rates to understand your current state.

So, what is it worth to you to understand how to improve your response rate by 10%?  Is it worth $150,000?  What is it worth to you to improve by 20%?  Is $300,000 profit enough incentive?

The bottom line:  You need to know how your marketing and advertising is performing and where you can improve efficiencies.  Do the math and it will become clear that there is an ROI on your ROI and analytics systems and processes.  Want ideas on how to get started?  See this recent post with some measurement tools to get started.

So what do you think?

What’s The ROI on Knowing Your ROI?