This post is one in a series designed to help SME businesses benchmark their business and create a best practice business improvement plan across all of their business processes. You can find the links to the full series here.
Why is it important to measure and understand the return on investment (ROI) of your marketing spend?
Marketing ROI is a way of measuring the return on investment from the amount a company spends on marketing. It can be used to assess the return of a specific marketing strategy, or your business’s overall marketing mix.
Justifying marketing spend: Whenever money goes out of your business it is impacting your profits. If your marketing isn’t directly linked to business objectives – delivering an immediate return to the bottom line, building the potential for a return in the future, or building brand equity and customer relationships then why are you doing it?
Deciding what to spend on: There are unlimited different marketing strategies and tactics available to most businesses. The challenge is deciding which ones to use and which ones to discard. Measuring the ROI on your individual marketing efforts will help you make smarter decisions moving forwards.
How does your business measure up?
Here’s a checklist to help you determine how well your business meets this benchmark.
- All of our marketing activities are directly linked to business goals and objectives.
- We know the lifetime value of a customer and take this into account when reviewing our marketing spend.
- We measure the ROI of our marketing activities in relation to their goals and objectives, taking into account measures such as brand awareness, brand liking, and brand knowledge, to determine whether our marketing spend is helping customers move along the buying journey even if they’re not making purchases now.
- We regularly review and compare the ROI of our various marketing activities to ensure that we are maximising the return on our marketing spend.
- We have a plan and a budget for building marketing collateral which will help underpin marketing strategies into the future even though they may not provide a direct return on investment in the short term.