Businesses spend a considerable chunk of their budgets on marketing campaigns, hoping to see results as soon as possible. Most use the marketing ROI an agency brings in to consider whether they will keep working with them.
This makes your core responsibility as a marketing agency to keep your clients happy by ensuring they get value for their money. Your first step should be calculating the general marketing ROI.
Here is a simple ROI formula you can use to calculate the amount you have gotten as profit from your expenditure:
An ROI formula will give you the general amount of profit gained, but this is not enough to show marketing ROI at a granular level. You need to show evidence that every strategy you have convinced your client to invest in is working. This will help you develop projections that will guide budgeting for the rest of the campaign.
Here are seven foolproof ways you can prove marketing ROI to your clients to gain their clients’ trust and confidence:
1. Set your KPIs
One of the most fundamental metrics marketers can use to show marketing ROI is Key Performance Indicators (KPIs). KPIs help marketers determine their success by measuring their progress against pre-defined goals. You can also predict the performance of a specific strategy and redefine it to perform even better.
Most clients come with set KPIs, making it easier to understand their goals and the results they are looking for. This allows for discussions on their best strategies and how to achieve them. However, not all clients will have KPIs, and you will need to collaborate with those clients to better understand their expectations and goals.
The best thing about KPIs is that you can tweak them to suit clients from different sectors and accommodate your growth model. ClicData has made this easy through its KPI templates for different sectors.
However, KPIs will not serve you as well as they should if you do not carry out constant KPI analysis. To help you achieve this, ClicData allows you to create a marketing KPI dashboard that allows you to get more insights from your performance analysis of each strategy.
To get the most out of the analysis, you need to look for indicators like:
- Follower growth
- Post impressions
- Likes or reactions
- Click-through rate (CTR)
The growth in each metric will help you track your reach and growth, which will then help you determine if you have hit your marketing goal. You can measure the marketing ROI for each in ratios to determine the viability.
2. Know your client’s costs
No one wants to keep investing in money-bleeding marketing strategies. For this reason, you need to continually assess how much your client spends at every stage.
Every penny needs to be accounted for, so it is best to make a list that will help you look at every expenditure and determine its worth. The amount of revenue acquired or lost should guide you on the best strategies for specific campaigns.
Here are some general fees you should include in your list:
- The agency’s fees
- Printing cost
- Video production & photography fees
- Software subscriptions
- Online ads
You can also determine strategies that need more effort or those that need to be dropped entirely. For instance, if you are looking to reduce the money spent on e-commerce sites, you could look for different alternatives to Shopify. This will save money that you can redirect to more demanding strategies.
3. Create an ROI threshold
Unrealistic client expectations are one of the leading causes of conflict between agencies and clients. The solution is setting an agreed marketing ROI limit in collaboration with your clients.
An ROI threshold is typically expressed as a ratio because it is easier to understand, apply, and calculate. Though the best ratio varies for different sectors and cost structures, the recommended ratio is 5:1. A 5:1 ratio will cover both the manufacturing and marketing costs, which is the goal most companies are looking to achieve.
The ratio you and your client settle on will help you develop reasonable goals. However, to set yourself or your agency apart, ensure you surpass the goal. It will earn you a good reputation and more clients.
4. Calculate the CLV from your marketing channel
Customer Lifetime Value (CLV) is the value a business derives from maintaining a customer throughout their life. CLV will help you identify your most valuable repeat clients, which you do by convincing them of your value.
It is only reasonable to target your current customers before you convince new ones that your product is worth their money. This is because it is easier to convince people who enjoy your products or services to buy again rather than sell to new people.
Most clients do not take advantage of this fact as much as they should, so it is your responsibility to encourage it by showing repeat purchases’ impact on the revenue. For this, you need to separate the revenue from first-time purchases and repeat purchases.
You can use this formula to calculate your clients’ CLV:
Customer Lifetime Value based on orders made = [(Avg. Monthly Transactions X Avg. Order Value) Avg. Gross Margin] x Avg. Lifespan in Months
You will need to work collaboratively with your clients to generate and understand the figures because they vary depending on the sectors and different customer journeys.
5. Create an ROI dashboard
A marketing ROI dashboard helps you and your clients keep track of each campaign’s performance. It provides real-time insights about your conversion rate and profit gained overtime for every account.
Your clients will appreciate the option to check in on the campaign’s performance more than the occasional briefing. An ROI dashboard provides transparency, which most clients are looking for.
If you want to create an easy-to-understand dashboard for your clients, check out ClicData’s dashboard. The dashboard helps connect, automate, prep, and visualize large volumes of data in the most interactive way possible.
The dashboard also allows you to connect all your online ads accounts to ClicData, and get real-time performance results for your campaigns. You can also identify the campaigns bringing you more leads, which will inform your budgeting decisions.
6. Look at the ROI of your campaign
To identify the best working strategies, you need to break down the strategies used in every campaign. For instance, if you were running a campaign for a client in the cosmetic industry, you might use various marketing channels like:
- Social Media ads
- Google ads
- Email marketing
- Print ads etc.
By doing this, you can identify the well-performing ones and separate them from the non-performing ones. You can then invest more in the performing strategies and either scale back on the underperforming ones or drop them entirely.
Proving your campaign ROI is easier if you have invested multiple strategies for every campaign, rather than depending on one that might not work as well as projected.
7. Modify based on your findings
Your client won’t be the only one who’ll benefit from your ROI calculations. Knowing your marketing ROI will also allow you to tell the strategies that you need to work on. Once you’ve identified opportunities for improvement, ensure your findings are implemented in your next campaigns.
For instance, if you are running Facebook ads, you need to prove they are worth the investment through their ROI. The ROI should be greater than your spending and the cost of human resources required.
However, if the campaign is running through your budget with no equal returns, it is time to modify your campaign. You can advise your clients to reallocate the budget for Facebook ads to channels that have a higher ROI.
Keep in mind that optimizing your campaigns is a continuous crucial process that retains and brings in more clients. Therefore, you will need to monitor, report and modify the marketing ROI you are offering to your clients. You can also analyze your competitors’ campaign strategies and take a few pages from their playbooks.
Ready to showcase marketing ROI?
You are responsible for proving that your clients’ investment in your services yields results by showing them your marketing ROI. You can prove your work’s worth to your clients by setting KPIs, knowing and tracking your clients’ costs, determining an ROI threshold, building a KPI dashboard, calculating your clients’ customer lifetime value, and analyzing the numbers.
Each of the steps discussed here will help you get closer to achieving your clients’ goals. If you assess your current campaigns and realize they are not working as they should, then it is your work to offer recommendations to your clients and modify your campaigns to yield better results. ClicData enables you to connect, automate, prep, and visualize all your data so you can make smarter decisions.
Remember, the only way to prove your work’s worth is to ensure your clients get value for their money.
About the author
Jimmy Rodriguez is the VP of e-commerce for Shift4Shop, a completely free, enterprise-grade e-commerce solution. He’s dedicated to helping internet retailers succeed online by developing digital marketing strategies and optimized shopping experiences that drive conversions and improve business performance.