When a client employs you to run a campaign on their behalf, simply saying, “We get results” will not cut it. You need to show them evidence that you achieved results. You need to demonstrate the marketing ROI. 

Companies spend tons of money running marketing campaigns. So, it shouldn’t surprise you if they are focused on getting an immediate return on investment (ROI). 

However, because of this pressure, about 23 percent of marketing agencies struggle to meet client expectations. 

Source: Hubspot 

Of course, a sudden bump in sales isn’t the only way to gauge the profitability of a marketing campaign. But how do you tell that to a client fixed on seeing immediate results?

In some cases, when marketers cannot show an immediate marketing ROI, they provide a projected ROI to anticipate. 

Your ability to project an evidence-based ROI for your client will help build their confidence in your methods, and subsequently, their willingness to spend more on future marketing campaigns. 

In this article, we’ll explain seven ways to demonstrate marketing ROI to your clients. But before that, what is marketing ROI?

What is Marketing Return On Investment (ROI)?

Don’t think of ROI as another marketing buzzword. It’s concrete proof that your client’s investment was worth it. In terms of marketing, ROI is the revenue earned from investing in a marketing campaign. 

You may calculate marketing ROI several ways, but a simple way is to subtract the profit from the overall campaign cost, divided by the overall campaign cost, multiplied by 100.

Here’s a simple formula:

Imagine a client spent $1000 for an ad campaign on Google, then earned $3000 in sales as a result. The money spent ($1000) is the investment, and the money earned ($3000) is the return. 

Even though we calculate ROI in terms of money, other non-financial ways to determine ROI include the Customer Lifetime Value (CLV).

The CLV takes customer retention, brand loyalty, brand advocacy, and brand engagement into account. These values may not equal an immediate return on investment, but they’ll have an impact on your client’s business in the future. We’ll touch more on CLV in a bit. 

Therefore, proving the value of your services is necessary for each marketing campaign. But how do you track marketing ROI?

How Can You Keep Track of Your Return On Investment?

Keeping track of your marketing ROI helps you know how well your campaigns are going. If a campaign is not yielding returns, it can help you identify what’s lacking, what to tweak, and strategies to cut off. However, if your campaigns are profitable, keeping track offers concrete proof and increases your chances of increased investment. 

Here are seven ways to demonstrate a campaign’s performance in terms of its ability to generate ROI for your client.

1. Choose Your KPIs

Key Performance Indicators (KPIs) are performance milestones set by a marketer to track their progress. If ROI is the profit earned from investments, KPIs are indicators that your campaign will make these profits (ROI).

Though meeting your KPI may not mean an increase in profit or be in the final ROI calculation, you must report them because the metrics are related. KPIs help you track your campaign’s performance and tell you when to make necessary changes. Your campaign’s ability to meet its KPIs also helps forecast its overall performance.  

To give your client a good grasp of their campaign’s progress, ensure that the KPIs used are measurable and quantifiable. Usually, your client will have an idea of their KPI, but it is part of your job to put things into perspective, point out other KPIs they may have missed, and correct an abstract KPI. 

Each campaign may call for its own KPI. For instance, The goal of a TV ad, billboard ad, and paid search ads may be to boost sales. But their indicators that sales will increase may vary. 

Before your marketing campaign begins, discuss with your client and decide on the best possible KPIs.

Some KPIs for online campaigns are:

• Number of link clicks
• Sessions spent on the content
• Sign up forms filled 
• The number of advert engagements 

And some offline KPIs are

• Sales revenue
• Customer lifetime value (CLV)
• Cost per acquisition (CPA)

Of course, tracking KPIs with online campaigns is more straightforward than tracking offline campaigns, but you can also track KPIs with web applications. 

For instance, using email software will let you know the open rates of your email campaigns and the conversion rates. Also, Facebook ads will show you an estimate of expected ROI before your campaign and provide you with engagement and reach data afterwards.

2. Calculate Your Client’s Marketing Expenses

Your client’s marketing expenses include every penny spent on the campaign. To calculate the marketing cost, you must understand the expenditure involved. Depending on the campaign, these costs may include; 

• Your agency fees 
• Printing costs 
• Graphics design cost 
• Video production 
• Media time 
• Software subscriptions 

And many other things that the client has to pay for to make the campaign run.

Sure, expenses are a staple in calculating overall ROI because we measure revenue against ROI. But, that is not the only reason to calculate marketing expenditures. 

Your client’s expenses are based on the type of campaign they choose to run and the channels they employ. Tracking the costs per channel helps you distribute the budget evenly and helps you know which channel to optimize. 

Calculating your client’s expenses also shows you the costs with the most impact on ROI. With this, you can make an informed decision on whether to scrap or move forward with a particular campaign process.

When calculating the marketing budget, ensure you justify every expense. This is because you’ll need it to secure a higher funding budget in the future.

3. Set A Return On Investment (ROI) Limit

After considering your client’s expenses, you should both set an ROI limit together so that you’re on the same page about what to consider a success. You should then use those calculations to set your SMART goals.

The ROI limit is the lowest benchmark or possible outcome you hope to achieve with your campaign. Essentially, a reasonable ROI limit serves as a reference for future campaigns, forecasts future success, and keeps your expectations grounded in reality. 

You should base ROI limits on practical calculations and forecasting. Most platforms like Facebook will suggest these limits, but with offline campaigns, you must base them off previous or similar campaigns.

As a marketer, your goal is to surpass the set ROI limit because that is the difference between good and exceptional marketing service. 

However, if you fail to set a benchmark, you might struggle with unrealistic expectations. This will make convincing your client for a higher marketing budget harder. 

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4. Calculate Each Marketing Channel’s Expected CLV

As we mentioned, CLV means Customer Lifetime Value. 

CLV is the value a business derives from interacting with a customer throughout their lifetime. It’s also another way in which you can help your client calculate their ROI. 

Sometimes, to attain ROI, your client might not consider the Customer Lifetime Value (CLV), which may seem absurd considering the immediate profit they’ll get selling to a returning or potential customer. In that case, it is up to you to let them know that with CLV, the first sale is not the last. 

To curb this mindset, it’s imperative to sell them the long term value of CLV, which includes; 

• A profitable business via repeat orders 
• Steady and predictable cash flow
• Loyal customers may become brand advocates and assist in acquiring new customers
• Business stability and revenue growth

Moreover, a high CLV also means customers love your clients’ products or services. 

Once you sell your client the importance of CLV in determining marketing ROI, proceed to include it in your calculations. You can do this in several ways. You can check the value of the orders your customers make, for starters, and another is with the customer retention rate. 

The formula for CLV based on Order Value is [(Average Monthly Transaction x Average Order Value) x Average Gross Margin x Average Lifespan in Months.

The formula for CLV based on retention rate is Retention Rate/(1 + Discount Rate/Retention Rate). 

CLV will help you identify the marketing channel that brings in the most valuable customers. This information will enable you to make projections and inform the client’s budget distribution.

However, tracking the CLV could be tricky as each customer’s journey will vary. So ensure that you work closely with your client to track the necessary CLV metrics and demonstrate how it impacts their business.

5. Make A Dashboard To Track ROI

Now that you’ve gotten your client on board with the CLV and established realistic KPIs and ROI limits, you need to create a dashboard that simplifies your ROI data.

Since you’ll be dissecting more than a few data from every campaign, it might be cumbersome to explain and overwhelming to understand without visual representation. 

So, here’s what you do: decide on the most useful data and design your dashboard to show it in an easily digestible way for clients. A good tip will be to have all the information for your campaign on the dashboard. 

You might want to utilize an analytics platform that gives a holistic view of your marketing results and provides real-time data for your client. 

Source: Zoho

Of course, you will need to configure the dashboard for whatever platform you choose. So when choosing a platform, you must choose one that allows the client to monitor their live performance, tracks customers across several channels, and unifies both online and offline measurements to give a holistic view of all ROI measurements.

6. Calculate the ROI for Each Approach and Campaign

Yes, you’ve measured the ROI and the CLV, but that’s not enough. 

Your client needs to know which tactics had the most impact on the marketing ROI. Therefore, it’s necessary to break down the marketing strategies used in the campaign and calculate the ROI value of each of them.

For example, your client may be a baby soap brand targeting new mothers to use their soap as a go-to toiletry for better child care. 

They may employ multiple channels like billboard ads, social media marketing, email marketing, and google display ads. Subsequently, the campaign as a whole could exceed the ROI threshold. However, one channel might have been responsible for bringing in the most return.

After calculating the individual ROI for each campaign, you may find that billboard ads generated 10 percent ROI, social media marketing brought in 50 percent, and email marketing had an 80 percent ROI. 

With this information, you can convince your client to scrap the billboard adverts, add more funds to their email campaigns, and improve their social media marketing strategy. 

7. Adapt Your Strategy Based On Your Results

We’ve hinted at this throughout the article. The essence of calculating ROI and monitoring campaigns is to guide you when adjusting your marketing strategy along the way. 

You were hired for a reason — you’re the marketing expert, not them. Upon hiring your agency, your clients believe you have all it takes to attain the highest ROI and make accurate predictions on each campaign. So, don’t be afraid to offer recommendations or make suggestions based on a data-informed approach.

At the end of the campaign, the client wants to know if their investment paid off. Optimizing your strategy along the way based on data-driven results will increase your chances of a higher budget, translating to more work for you and satisfied clients.

Wrapping Up

When it comes to demonstrating marketing ROI, all your client needs is concrete proof that you put their money to good use. However, they may not have a clear perception of what this return is. And sometimes, they may be overreaching. 

It’s your job to demonstrate a realistic view of which KPI is possible based on their expenses and campaign approach, plus establish a benchmark for their ROI expectation. If you fail to do this, you’ll struggle to reach the client’s expectations.

Therefore, endeavour to have that first conversation with your client. Understand their expectations and understand what their limitations are before you take on any marketing campaign.

And remember, your responsibility to your client is simple — provide them with value.

Guest Author Bio

David Campbell is a digital marketing specialist at Ramp Ventures. He helps manage the content marketing team at Right Inbox. When he’s not working, he enjoys travelling and trying to learn Spanish.

How not to calculate marketing ROI

Following is an excerpt from an email I got from one of my clients:

……there might be a positive ROI on actual ad spend, there is actually a negative ROI overall (including cost of shipping, products, packaging, staff etc)”

This discussion (or better say disagreement) was around how to correctly calculate the marketing ROI.

And this is not the first time I have faced such objections. There are still a lot of marketers and business owners out there, who calculate marketing ROI incorrectly.

Following is the most basic formula to calculate ROI:

ROI = (return from investment – cost of investment) / cost of investment

Almost everyone agrees with this formula and agrees that it is correct.

The disagreement pops up when it is time to decide what should be included as ‘cost of investment’.

For marketing ROI, the cost of marketing is the cost of investment.

Marketing costs should include both ad spend and marketing fees. If you do not take marketing fees into account then what you are calculating is ‘return on ad spend’ (ROAS) and not ROI.

Now the question is, why do some clients raise such objections in the first place?

There could be a situation where your client is not overall profitable as a business, despite positive marketing ROI.

This could be due to some operational inefficiencies like bureaucracy, company culture, product pricing, merchandising, etc.

As a marketer, you have no control over the client’s operational inefficiencies. 

You have no control over the operational and strategic decisions that your client takes in his office regarding how their business should run and grow.

You have no control over the client’s staff salaries, product pricing, shipping, packaging, merchandising, operational cost, and the various taxes, customs, excise duty, etc that they have to pay.

Your role is limited to advertising their products/services and so should be your business liability.

Your job as a marketer is to make sure that you recover your entire marketing costs, including your own fees and make money on top of that.

You are not responsible for generating staff salaries or recovering entire product manufacturing and distribution costs from your marketing efforts.

We never calculate marketing ROI like that.

Long story short, as a marketer you are not responsible for the overall profitability of the client’s business.

That level of responsibility lies on the shoulder of key stakeholders (business owners, business partners, top-level executives) within the client’s company.

So next time, when you face such objection from one of your clients, educate him/her about your limitations as a marketer.