ROI And Advertising—3 Key Benchmarks

Recently, I wrote about 2 step direct response advertising because I think it’s the most valuable method of advertising. 

For small business owners, advertising can be a tough one.  In order for typical media advertising to be effective, it needs to repetitive and consistent, and most small businesses just don’t have the budget to support a campaign of that nature.  I think much of the challenge with advertising is that the only thing that gets measured is how many phone calls the ad generates and which of those turns in to business. 

advertising ROI

Calculating Your ROI on Advertising

In order to calculate your Return on Investment (ROI) for any advertising campaign, simply review the following:

 Total Cost of Campaign divided by Average Lifetime Value of Client    

This equals the breakeven number of new clients the advertisement or activity needs to generate.

In order to make these calculations, you’ll need to put some diligent tracking methods in place.  Unfortunately, this is the part that takes some elbow grease and many business owners don’t seem to want to invest in the time it takes to track these indicators.  A simple solution is to create a series of questions you answer with every new prospect that calls.  And it doesn’t have to be as obvious as a full blown questionnaire, you’re simply having your prospect answer many of the same questions you ask them anyway.  Now, you’re just keeping track and doing some calculations based on their feedback. 

You’ll want to collect answers to questions like the following:

1.  How did you hear about us?  Record the ad, the person, or whatever the source might be.

2.  What did you search for or Google online?  What key words or terms did you search on? 

3.  What made you decide to give us a call?

This series of questions will evolve over time, but start creating a system or process now and make sure everyone in your company follows it and documents it.  Then take some time to analyze to figure out your next move.

Without some tracking, you’ll never know what kind of return on your investment you’re getting from your advertising or any other method of lead generation.  Tracking and benchmarking will allow you to make informed decisions about your marketing now and well into the future.  What else are you tracking?

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