Marketing

# Marketing ROI: Budgeting Your Money Wisely

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I started marketing well before the Internet so I have ample experience with marketing strategies whose return on investment is hard to measure. Back then, we still valued analytics, but we learned to make do with reasonable estimates and common sense. I call it a crossword puzzle method for lack of a better name. We use clues to put together estimates.

Much like the crossword puzzle player uses clues from one item to help fill out another, we can look at our total sales and break it down into the sales directly attributable to specific marketing programs and the sales we can't tie or link to any specific program. That gives us a benchmark guide to estimating. Every successful business has sales coming in from past marketing, so that's part of the non-attributable element.

But while accurate return on investment information exists for certain aspects of marketing -- like web traffic, clicks, email opens and conversion rates -- other forms of marketing, like media mentions, presence at events, and sponsorships have inherently immeasurable ROI. But not being able to easily calculate ROI doesn't mean it's not there.

Take media interviews, for example. Say your business appears in a New York Times article based on an interview you conducted during a trip to New York. This is good for your business, but it's not an easy ROI to calculate. Let's use the crossword puzzle method to calculate estimated ROI.

First, add the cost of time invested in making appointments plus the time and travel expenses invested in doing interviews. Let's say you determine that your time costs your business \$150 per hour using this simple calculation. Then let's say you invested three hours of time to set up appointments and eight hours doing the interviews for a total of 11 hours (11 x 150), which is \$1,650. And we'll add in a day's worth of travel expenses, which comes to another \$350. So the total investment is \$2,000.

Now let's assume that your interviews produced that favorable coverage in a New York Times business column. What's the ROI on that \$2,000 of spending?

Of course we go first to the online analytics. We look for web traffic coming straight from the New York Times to our website and assume that it's the result of the mention. If we have good online analytics we can apply the available tools to track Internet interactions such as clicks on links, sources of web visits, and online sales conversion rates to calculate the sales attributable to people coming directly from the mention to our website.

That said, the measurable online sales are likely just a fraction of the total impact. One obvious example of what we don’t track are those people who will see mention in the physical newspaper and visit our website -- visits that won't show up as coming from the New York Times. Just because those visits and sales (among others) won't show up in our standard analytics, doesn't mean they aren't valuable. So we develop reasonable estimates, using partial information and clues, much like solving a crossword puzzle.

One clue is a sales bump. Let's assume \$50,000 of the month's sales are directly linked to marketing efforts with a clear ROI, but that we have a total of \$70,000 in sales. Compare that to the previous month's sales breakdown and that's another clue. Think about other possible causes: Maybe we were at a trade show in New York, which also caused an increase.

Of course, sales will also come from the permanent web search on the New York Times column. We know that's a factor, but we don't know exactly how much to estimate.

What’s the purpose of going through all this trouble? It helps guide decisions moving into the future. While you might have intuitively concluded that the extra \$2,000 for the press interviews was worth it, having estimated ROI numbers gives you a clearer picture of what you invested and what you got in return. And if you do this right -- recognizing that uncertainty is part of the picture -- you won't have accuracy down to the last dollar, but you will be able to make more informed management decisions. And that, after all, is what running a successful business is all about.