Say you want to start a new marketing campaign for your business that involves your business sending out promotional products. Say you’ve already worked out all of the specifics of this marketing campaign – who your target audience is, how you will distribute the products, and how you will spread awareness. Let’s also say you’ve pitched this to the higher-ups and have explained your plan to the best of your ability. Then one of the board members asks the question: “What’s the ROI on that?”
When it comes to any major business decision, whether it be to start a marketing campaign, to release a new line of products, or even to start a business outright, this is often the first question that comes to an investor’s or entrepreneur’s mind. A lot of the time the ROI serves as the basis for much of the decision making that occurs at the executive level of a company, and is often the main reason why businesses make the moves that they do. But what is ROI anyway? How do I find out what the ROI of my campaign will be? How will this help my company? We’ll answer all that and more after the jump.
First things first, let’s define what ROI is. The full form of ROI that is seen most often in day to day usage is “Return on Investment”; however, the acronym can take a second meaning in the context of marketing or advertising campaigns. This is called “Return on Impressions”. The key difference between the two is the result – the Return on Investment of a marketing campaign refers to the profit generated as a result of the campaign, while Return on Impressions measures the success of a campaign by the amount of awareness it generates. With that in mind, there are actually two ways you can calculate the ROI of a marketing campaign, but both still follow a simple three-step method:
- Determine the goal and metrics of the marketing campaign. The metric in this case is the measure by which we determine the success of the campaign.
- Measure the results of the marketing campaign based on our chosen metric.
- Calculate the final ROI value.
Calculating Return on Investment
As we have already discussed, the return on investment of a given marketing campaign refers to its overall profitability, expressed as a percentage value which we will go into more detail later. To reach this value we would need to know a couple things. Following the three steps mentioned above, we would first need to specify the goal of this campaign and the metric we will use to determine how successful the campaign is. Since the return on investment focuses on the financial aspects of the campaign, we will set the goal of the campaign to generating a profit and the metric of success to the local currency.
The next step – measure – involves gathering data about the campaign so we can generate the ROI value later on. To do this, we would have to put our marketing campaign out into the world and measure its reach. Now, promotional products are nearly impossible to track once they are out of our possession, so for us to be able to track the reach of our campaign, we would have to find a way to control where our promotional products go. We can start by limiting their distribution, either by giving them away through raffles and contests or sending them out to content creators as a way to generate consumer-enthusiast reviews. Once you’ve set a distribution method, we would then need to add a tracker to our promotional items. These trackers aren’t physical tracking devices, of course; instead it can be a link to the raffle, a page on your website, or a #topic on social media. This would allow us to filter our the revenue generated by the campaign itself.
With that done, everything comes together in the last step. To calculate the final ROI value, we will need to take the revenue generated by our marketing campaign, and subtract it by the cost of the campaign. These costs encompass all of the costs associated with the campaign, such as the cost of the promotional item, the cost of shipping the items, and the like. After subtracting revenue from the cost of the campaign, we would then have to divide that result by the cost of the campaign again. This result is a decimal point, which can be expressed as a percentage value by multiplying it by 100.
For example, if our promotional product campaign cost $200 and generated $250 in revenue, the ROI value would be calculated as ($250 – $200) / $200 = $50 / $200 = 0.25. Multiplying this number by 100 we get 25%, which is the return of investment of our promotional product campaign.
Calculating Return on Impressions
Finding the return on impressions of a given marketing campaign more or less follows the same three-step process. The key difference here is that the primary goal of the campaign is not to generate revenue, but instead to spread brand awareness. This means that our three step process will have a few key differences.
Instead of money, the success of our marketing campaign will be measured by audience ‘buzz’, which can be quantified by pageviews, shares, and reactions on social media like ‘likes’, ‘hearts’, retweets, and more. And because money is not a primary concern when finding return on impressions, you will not need to make calculations on the cost of the campaign. Rather, we will only need to add up all of the media hits and clicks generated as a result of the campaign.
Why Promotional Products?
Although one might initially think the contrary, promotional products are actually a surprisingly powerful marketing tool. Unlike traditional print, radio, or TV ads, promotional products tend to serve more than just a novelty role and can actually be useful to the recipient’s daily life. If executed correctly, a good quality promotional product provides better customer retention and brand recognition than comparable print, radio, or TV ads at a lower cost.