Have you ever been asked the dreaded question:
Can you prove your marketing return on investment?
Unfortunately, this question often results in a deer in the headlights look. Something that looks a little like this:
To avoid this moment of panic (and to keep your eyeballs firmly inside your head where they belong), here are 2 of the best ways to break down and prove your marketing return on investment in a way that will speak to just about anyone who might ask that question.
1. Marketing Originated Customer Percentage
For this specific metric, you are calculating what new business is being driven by your company's marketing efforts. This is an extremely valuable metric to use when proving marketing ROI, because it shows the specific impact of your marketing team's lead generation efforts.
In order to calculate this percentage, select a period of time that makes sense for your company (typically a month or a quarter) and identify the number of total new customers during that time frame. Divide the number of total customers by the number of new customers who started as a marketing lead. This will equal your marketing originated customers percentage.
Here's an example:
Keep in mind that this is not including customer's who have been influenced by marketing before committing to your product or service. Instead, it is solely looking at new customers who originated from marketing.
2. Consumer Acquisition Cost (CAC)
The CAC metric is used to determine the total average cost your company spends to acquire a new customer. This metric is useful, not only in and of itself, but also in determining more complex marketing metrics down the line. These additional metrics can allow you to compare your CAC to the lifetime value of your customers in order to ensure that these numbers make sense in relation to each other.
But before you can dive into these other metrics, you must calculate CAC by adding up your company's total sales and marketing spend for a specific period of time (a month, a quarter, etc.) and divide it by the number of new customers for that period.
It's as simple as that!
Here's an example:
The tricky part is really digging into your total spend on sales and marketing. This includes any type of advertising spend, salaries, commissions and bonuses, overhead, and any other factors that would affect this number.
The ultimate goal of your marketing is to produce customers, so understanding the relationship between your marketing and your customers is vital to proving your marketing ROI to just about any one who might ask. Don't get caught off guard the next time someone asks you to quantify and prove your marketing efforts.
Keep in mind these two metrics are only the tip of the iceberg. Learn more about the marketing metrics your boss actually cares about by downloading our cheat sheet!