If you’re not doing ROI calculations before and after your marketing initiatives, you certainly should.  Let me remove any excuse for not doing this…

I’m surprised by how easy it is for marketers to overlook this important calculation as they weigh their creative options and plan their campaigns.  So, let this first act as a simple reminder not to undertake anything marketing-related this year without at least considering your anticipated return… and the return you got the last time you did something similar.

Sometimes it’s admittedly difficult to arrive at solid ROI forecasts in the marketing arena.  Your investment in PR… in word-of-mouth… brand-building….  That’s not to excuse those who turn a blind eye all-together to ROI relative to these activities, but there is no denying that it can be tough.

But when it comes to direct marketing and pay-per-click advertising, you’re insane if you aren’t being diligent about ROI.

This is why I’ve taken a couple of my own ROI calculators and published them here for you to use whenever you like. Bookmark the page. Send it to your colleagues. And never again accept another DM or PPC marketing proposal without a clear calculation of ROI (along with the underlying assumptions).

Despite their less-than-exciting names (Direct Mail ROI Calculator and PPC ROI Calculator), these calculators have other applications if you are careful with your assumptions.

For example, any direct marketing or other campaign for which you can estimate your reach and your campaign costs can be dropped into the Direct Mail ROI Calculator replacing mail quantity with your reach estimate.

Similarly, ROI for most any online campaign can be estimated with the PPC ROI Calculator by simply assigning an assumption to your click cost in the campaign.  You should be doing this anyway.

I can’t tell you how often people tell me “I can have an ad (banner) on XXXX.com for only a penny per exposure!”

Most people wildly over-estimate their click-through-rate (CTR) on ads like these – and the quality of these clicks in terms of their conversion likelihood.  Test your assumptions and their ultimate pay-off using the PPC Calculator.

Where these calculators differ from most others I’ve seen is in the break even analysis.  Most of us like to know these simple answers as we work through our campaign assumptions.

“If these are my costs and quantities, and this is my profit from an average sale, what kind of response rate do I need to make this campaign worthwhile?”

“If my sites converts X% of visitors into buyers, and I make Y in profit from an average online sale, what can I afford to pay for a click?”

These break even calculations provide answers to these and other similar questions.

Now, I’d like to ask something of you. Tell me the ROI questions that puzzle/trouble you most. I plan to pay special attention this year to ROI issues.  Your response may lead to new calculators on the ROI Calculators page.

Second, if you’ve got an approach that has helped you calculate ROI on other types of campaigns, I’d love for you to share them with me.

Now go try these calculators.

This entry was posted on Monday, January 7th, 2008 at 5:34 pm and is filed under Direct Marketing, Web Marketing, Marketing Economics & Metrics, Marketing Principles. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.