What is the ‘magic X%’ for a marketing budget’s ROI?

ENCE Advertising Agency Singapore

Marketing, as a rule, is not cheap. Now, what seems ‘cheap’ to some businesses could be an entire company’s weight in gold to others. But the fact remains that marketing is something all businesses shell out hard-earned resources for. That said, a business that spends on marketing needs reassurance that what it spends on does exactly what it is meant to. A business spends in order to drive profitability.

But are we talking mere blips or bounding leaps to the top of the profitability graph? Surely the tens of thousands of dollars you spent on your last ad campaign got you results of some kind. But how do you know whether those results are good enough, or better yet, great?

Keeping an eye on ROI

The Return on Investment, or ROI, is a standard way of measuring just how well your marketing campaign was able to generate sales. Simply put, the ROI is how much money you’ve made out of a certain amount of money you’ve spent. ROI’s are usually expressed as “X%” — if X was a big enough number (ideally 100 or higher), then your marketing effort was resoundingly successful.

While arriving at that X% can be simple as “one and one make two”, more often than not, calculating one’s ROI can be overwhelmingly complex. There are so many factors that affect how a customer buys. These factors come in from both the investment and profit stages of a marketing campaign.

On top of how much you spent on a campaign, and how much you made in terms of sales, you have:

  • The price of the product or service
  • The place where it was offered
  • How it was distributed
  • What your competition was doing
  • You name it.

As these factors vary from business to business, what a good ROI percentage is for some, may be too low for others. In other words, there really isn’t a single, “magic X% that all businesses can aim for.

And if the number of variables going into the equation didn’t make ROI calculation difficult enough, sales is worthwhile noting. Sales, especially during or right after a campaign’s run, can be a tricky way to measure ROI. This is because marketing efforts that may not seem to generate any leads today, could translate into long-term repeat customers later on.

So why ROI?

Keeping an eye on ROI remains essential precisely because it keeps you on point. It can show you whether the precious resources you’ve allocated to marketing are doing just what they are supposed to. It’s statistical evidence you can use in planning your marketing budget.

When times are tough, you may be tempted to cut back on marketing as an “optional expense”. The ROI will be there to remind you that marketing is a key component of generating sales. This especially holds true for SMEs, where keeping close tabs on the marketing budget is paramount.

In these situations, it’s a good idea to remember the “I” in “ROI” — marketing is an investment. If the money you’ve spent gets you the results (namely, the profit) that you want, it will ultimately be worth it.

The “R” in “ROI”

The “returns” or the profits that are generated by a marketing budget are arguably the lifeblood of any business. When it comes to this lifeblood, availing of expert help from a dedicated marketing agency may prove to be the wisest course. An expert marketing agency not only formulates and drives marketing efforts toward success, but will know how to measure that success.  This success, because of the ROI calculation factors mentioned, is usually specific to an individual business.

Expert marketing agencies have the experience and the expertise crucial to making decisions on how best to maximise a business’ marketing budget, regardless of its size. After all, nobody in their right mind would leave the lifeblood of their business to chance, right? And yet, that is what happens when you spend thousands of dollars on marketing without insightful use of ROI as a guide.

A Guiding Light

The principles of making sure a business’ marketing budget is invested wisely with ROI in mind are what guide an expert marketing agency. As such, it will have frameworks in place to measure those returns. Those frameworks will have been used time and again in evaluating the ROI of marketing campaigns run by businesses in various industries.

Our own frameworks measure the results of our marketing campaigns for several businesses.  These businesses have seen concrete figures on these frameworks demonstrating how well their marketing efforts perform in reaching their goals. One and all, these businesses inevitably recognise the importance of ROI in generating sales from a continually growing customer base.

Get in touch with us today and find out how savvy ROI-guided marketing experts can help your business. Together, we’ll find out what the optimal ROI goals for your business could be, and the best ways to enable your marketing budget to reach them.

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