Driving a profitable performance is important in any company, and at the heart of every good strategy lie three little letters – R O I. Return on Investment. It is an intelligence that drives marketing strategy.
To generate a profitable performance marketers move prospective customers through the pipeline sales process. From initial awareness and interest to the acquisition of a customer and continued profitable transactions. It may involve a single marketing promotion or an integrated campaign.
By monitoring performance indicators that align with the transition into customer acquisitions, marketers can understand what marketing techniques and channels are effective and drive the required actions. That information is invaluable. At the same time any areas for improvement can also be identified.
This is why ROI is growing in use within the most effective B2B marketing companies, earning its place in forming and modifying activity, and driving strategy.
ROI = (Gain from marketing initiatives) – investment
Investment
Marketing profitably is driven by;
1 The initial value of the sales generated
2 The likelihood of converting prospects into repeat customers
3 The cost to generate that sale
How does your company calculate marketing profitability?
As well as ROI profitability, other financial and marketing measures include:
% of opportunities converted to sales
% of leads converting to opportunities
% response
Number of opportunities generated
Number of days from lead to sale
Average revenue per sale
When calculating marketing profitability, there are three key areas to analyse.
1 Lifetime Value: Value of profit from the customer transaction. ROI improves as this increases
2 Total Number of Customers: Generated from the marketing investment. ROI improves as this increases
3 Marketing Expense: Total marketing investment made with the expectation of generating a return. ROI improves as this decreases
Marketers are under constant pressure to understand how best to allocate marketing budgets, grow the sales pipeline and move colder prospects to raving customers, as well as spend budgets wisely with impact on the bottom line. Achieving a positive ROI is elementary for good business management. After all, if you are consistently delivering positive returns, the business is healthy and you are HAPPY.
Karen Lambert is an experienced strategic marketer and Managing Director at Happy Creative, a full service marketing agency based in Blackpool, Lancashire. To learn more or contact us please go to www.happy-creative.co.uk
