There are several versions of this formula that can get as detailed and complicated as you need, but for the purpose of this article we are going to keep it simple. This infographic at Kissmetrics will show you different variables you can play with to get the most accurate measurement.
(Customer Lifetime Value - Marketing Investment Per Acquisition) / Marketing Investment Per Acquisition = ROI
Here's an example:
We're going to keep this as simple as possible. (Average purchase value * Average number of repeat purchases)
Let's say you run a SaaS startup and your average customer subscribes to your service for 18 months and you average $75 in revenue per customer.
That means (in simplest terms) your average customer lifetime value is $1,350. ($75 * 18 months)
Now let's say your Marketing campaign costs you $1,000 per month and acquires 4 new customers each month. That's an average cost of $250 for each new customer. ($1,000 / 4 customers)
Plugging those figures into the formula above, we get:
(1,350 - 250) / 250 = 4.4 = ROI of 440%
Again, this is a very simplified approach and there are other factors to consider, but you get the idea.
Let this be a lesson to why all businesses need to focus on customer retention, as well as customer acquisition, because it increases the customer lifetime value.
If you're absolutely obsessed with raw data and tracking everything, this is a tool you will enjoy.
Bitly has always offered a free tool that allows you to shorten links for sharing on social media. However, now they have expanded to premium products that allow you to measure the engagement of your audience through the links that you share.
By sharing your custom links in social media campaigns, email Marketing campaigns, and in the author bio for your guest posts -- you can measure the engagement of your audience across all platforms and devices.
The more information you have, the more accurate your ROI calculations are.
Not Satisfied With Your Inbound Marketing ROI?
After calculating your ROI, you might be a little disappointed.
That's okay. The whole point of calculating your ROI is to have a clear picture of what's going on so you can figure out how to maximize your ROI.
A question to consider is: who is handling your Inbound Marketing?
The entire point of Marketing is to produce a positive ROI -- but you'll never know if you're wasting your time and money unless you actually measure it.
The more systems you have in place to track performance and gain key insights into your persona's behavior, the more information you have to improve the ROI of your Marketing campaigns. It takes a little effort to get these systems in place, but it's well worth the time invested.
Be leery of agencies who try to tell you that ROI can't be measured with Inbound Marketing. Yes, it is more complicated and takes more time than some forms of direct Marketing, but the companies who do it right track their results.
Are you curious to know what the ROI for Inbound Marketing is? You might be surprised by the facts.