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July 5, 2016

How to Get a Good Return on Your Online Marketing Investments

Spending money on different marketing strategies eventually leads to questions about the return gained from a particular investment. Huge companies have the time and talents to create sophisticated statistical models used to target audiences precisely with the messages they need to hear and tweak marketing campaigns in real time. As a result, they can reap massive rewards from their investment.
Small businesses have more challenges evaluating their marketing ROI because they don’t have the resources available to get the job done. Unfortunately, owners of small businesses often blindly continue spending on various marketing efforts hoping that something will stick, but never knowing the degree of their success.

Spending money on hastily composed ads does not guarantee you will receive any benefit, and many marketing channels have automated billing features that can keep your advertisements running forever. Between managing inventory and supervising employees, you probably have no time to think about your marketing investments. Add bookkeeping and other responsibilities to the mix, and you might feel lucky just for having some form of marketing effort in place. You can use your limited amounts of time to get good returns on your marketing investments by following some simple principles.

Measuring Online Marketing ROI

Traditionally, you might look at subtracting your investment cost from the profit gained from your investment, and then divide that number by the cost of your investment. In the online marketing world, finding accurate figures to plug into the formula can be a challenge. You can simplify your calculations by using a shortcut used by many of the world’s largest companies.
Consider your ratio of revenue generated by your marketing program to its cost. This metric will help you evaluate the return on any of your online marketing investments, without soaking up too much of your time. This move will help you make bold marketing decisions that benefit your company more than random shots in the dark.

Illustrating the Strategy

Suppose you spent $10 on a text messaging campaign with the hope of attracting repeat business from your most loyal customers. As a result, a small percentage of your list visited your website and spent $100. Your revenue to cost ratio would have been 10. Assuming that companies want at least a five-fold return on their investment, you would have done better than average. The additional business added only variable transaction costs to your operation, so you can say you expanded your bottom line from the text messaging campaign.

Evaluating Your Campaigns

Before undertaking any marketing effort, estimate your revenue to cost ratio in advance. Screening your options will help direct your marketing investments into activities that will get you the best results. As you execute and after you complete the campaign, compare your results and see how your estimates compare with reality.
Even when you do guest blogging and spend time or money on white-label SEO strategies, you can quickly evaluate if the results you get justify the price paid or the time spent. You might not feel very sophisticated using this approach, but will feel good when you have the assurance that you can manage your marketing activities well without neglecting your other responsibilities.

Quick calculations on the performance of your marketing investments will ensure that you always enjoy a good return. As time passes, you will recognize which channels and tactics work best for your business and will invest your money expanding and optimizing the campaigns that give you the highest revenue-to-cost ratio. Prioritize your spending by ranking opportunities such as Facebook and Adwords. Even when you do daily deals or coupons, you can use your handy calculations to get you the best results for your money.


Brooke Chaplan is a freelance writer and blogger. She lives and works out of her home in Los Lunas, New Mexico. She loves the outdoors and spends most her time hiking, biking and gardening. For more information contact Brooke via Twitter @BrookeChaplan.