General
How to Make ROI Based Decisions in Digital Marketing (or any marketing)
Jun 02 2016
I gave a “Social Media for Customer Service” training recently, and was asked an interesting question. The question was about ROI; I was asked what the ROI was on investing in customer service. How can they justify the spending? Without more information I couldn’t really give a definitive answer, but I could provide a framework to simply answer the question, or any investment question in marketing.
ROI = Return on Investment
We need to weigh the expected return against the investment.
While we don’t have the specific answers, we can do “back of the envelope” math to determine if the investment is likely to payout or have positive ROI.
Here is the simple math to calculate the ROI of anything:
Then we step back and apply logic and common sense:
Once you start implementing you can measure over time – the customer service employee can track the number of customers gained or retained and we can measure the actual impact.
This math can be used in many scenarios to understand the potential ROI or probability of positive ROI from digital marketing spending. Over time when you have results you can probably measure the specific ROI.
Facebook ad ROI:
While this doesn’t give you the exact ROI it does give you an idea of what is needed to payout. You can also use this to compare vs. other investment choices. For example, if you need a 1% conversion rate to payout social media ads but a 2% conversion rate to payout television ads you can now compare the two options. Is it likely that television converts at double the rate? Is it a much more impactful medium?
Rather than trying to get to a specific ROI number, use this to determine the minimum return needed and compare and benchmark across mediums.
Try FREE for 5 Days!
•Number of new customers required to payout: $100 per customer/$50 cost = .5 new customers /day
how you got the result (0.5)
I think it is like
100/50=2
thanks
Yeah, the equation is 50/100, rather than 100/50.