Measuring Marketing ROI to Build the Case for Growth Marketing

One of the most important responsibilities for marketing professionals in small to midsize businesses (SMBs) is overseeing the marketing plan and budgeting it well. This is a high-pressure/high-reward task.

When a marketer pitches their marketing budget to the CEO, demonstrable results from previous marketing campaigns help drive home the value of investing in marketing and help justify continued spending on growth marketing.

So how do you quantify those results?

In this article, we'll walk you through how to calculate your marketing return on investment, or MROI, addressing each section of the equation and highlighting best practices for calculating each number.

Applying this equation to your marketing campaigns will enable you to objectively and concretely assess the financial value gained from a specific marketing program, or the firm's overall marketing mix.

This calculator will better prepare you to advocate your future budget requests, and make you a more effective decision-maker.

What is the value of calculating marketing ROI?

Calculating your marketing ROI allows you to better accomplish two important tasks:

Make informed marketing investments

How do you decide between investing in a social media presence or strategic ad spend? What about email marketing? Video? Content? Trade shows?

As a marketing lead with a finite marketing budget and nearly endless marketing strategies, you will have to pick and choose how you spend your marketing budget.

Calculating MROI at the individual campaign level can illuminate which programs and campaigns had a higher return and, therefore, might warrant continued investment. Hard numbers can inform how you advocate future budget allocation and guide your marketing strategy for the coming year.

Objective measurements of ROI on company funds keep everyone accountable for using their allocations wisely. The MROI calculation also prompts individual marketers to think about and justify every dollar before they spend it.

Justify your budget/growth marketing spend

From small businesses to enterprise powerhouses, marketing is a significant expense. MROI helps demonstrate the positive financial impact of investing in marketing.

The CEO/founder of a small business may make the final decisions on how and where money is spent, but they rely on their marketing expert to inform those decisions. By calculating the MROI of your campaigns, you can show your leadership team exactly what your marketing investments are gaining for the company.

What is the MROI calculation?

At its simplest, the equation looks like this:

Marketing ROI calculation as outlined by Harvard Business Review (Source)

How do I calculate the inputs?

MROI is not a one-size-fits-all calculation. Quite the opposite, in fact.

Your marketing team must approach each campaign individually, aware of the unique set of goals and considerations that come with each campaign.

That said, there are two numbers needed to calculate the ROI of a marketing campaign:

1. What your company invested in the production of the campaign (Marketing investment)

2. Revenue gained from the campaign (financial value gained)

1. Marketing investment

Calculating the cost of your marketing investment is pretty straightforward: you'll need to add up costs such as time, labor, ad spend, etc.

Let's look at a social media marketing campaign, for example. The marketing team has launched a Facebook campaign, either paid or organic, with a dedicated landing page and some form of lead capture.

In order to calculate the ROI of this Facebook marketing campaign, we need to know how much the company invested financially in the campaign.

The marketing lead might consider the ad spend (if the Facebook campaign was paid), the cost of any social media software utilized for this campaign, the labor costs of team members who worked on the campaign, the cost of any derivative content pushed out to promote the campaign, etc.

The sum of all the costs of preparing and conducting the social media marketing campaign will be your marketing investment.

2. Financial value gained

Once you've calculated your marketing investment, the next and more complicated step remains: calculating the incremental value gained from your marketing campaign.

For the social media marketing campaign discussed above, this requires tracking the number of visits to the campaign landing page, number of leads captured from the landing page, and the close rate for the captured leads.

Tracking close rates and captured leads will equip you to calculate the number of value-add conversions that came from the campaign. Multiply this by the average (or mean) value gained by a customer to reach the total financial value gained for the campaign.

Depending on your business model, however, the process of calculating your value gained, also called your revenue, will likely vary.

If your social media campaign intends to link potential customers to sales items and facilitate purchases, such as a Facebook ad campaign selling winter boots, the revenue gained from the campaign is straightforward to calculate.

However, many marketing campaigns are designed around more than just generating sales. These can include things such as brand awareness via media mentions, social media likes, and even the content output rate for the campaign.

If your social media campaign is intended to drive awareness instead of hard sales, or if you're selling a service, not a good, we recommend you ask customers upon purchase how they heard about your business. Collecting and recording this data will enable you to calculate how many people were moved to purchase by your campaign and directly attribute that revenue.

ROI calculator

Now that you've calculated your marketing investment and your value gained, you are ready to calculate the ROI of your marketing campaign.

Enter your numbers into the calculator below to calculate your marketing ROI:

ROI calculation best practices

As marketing teams plan and execute their unique, individual marketing campaigns, they will need to begin the ROI calculation anew with each campaign.

While there is no silver bullet, no equation that will work for each situation, there are a few things to keep in mind as you make your calculation:

1. Be consistent with your variables. Whether calculating for purchases, mentions, or new subscribers, be sure to keep the units the same across each step of your equation.

2. Seek out the advice of your finance department/accountant. If figuring out what goes into calculating your revenue or investment is a bit overwhelming, talking with your finance lead might help you better understand which data points to use and where.

3. Check out these calculators. In addition to this article, consult these articles for guidance on how to calculate your marketing ROI for an email marketing campaign, or a social media marketing campaign.