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- [Velera] In marketing, awareness is great
but sales are what we really want.
So how do you know that your investment
in content marketing is producing your desired sales?
It's by evaluating ROI or return on investment.
ROI measures the return or sales
that result from your investment in content.
It's important to calculate ROI because more than likely,
you'll need to show stakeholders
the ROI for your content marketing
in order to justify the continued spend.
Before you can calculate ROI,
you'll need the following information.
One is the cost of the investment,
which is the amount spent to create and promote the content.
The other is net profit,
which is sales revenue minus the cost of the investment.
Now, to calculate ROI, you can simply do the following.
Divide your net profit from the content marketing
by the cost of investing in the content.
Let's walk through an example on calculating content ROI.
Topsy Turvy Cake Design generated $150,000 in sales
from their cake decorating tutorial video series.
They promoted the series online
and posted in their social media pages and website
to generate registrations.
First, let's examined their costs.
They spent $30,000 to create the videos,
$20,000 to develop the video hosting site,
and $30,000 to promote the tutorial series online
for four months.
In total, they spent $80,000 for the campaign.
Next, we subtract the $80,000 spent
from the $150,000 in sales to get a net profit of $70,000.
Finally, to determine Topsy's ROI,
we divide the $70,000 in net profit
by the $80,000 investment costs to get 88% in ROI
for their content marketing efforts.
Based on these results,
Topsy decided it would continue investing
in the tutorial campaign.
Calculating ROI let's you determine the revenue and return
your content marketing is contributing to your company.
It also gives insight into where it makes sense to invest
future marketing dollars.
As a result, you should continuously evaluate ROI
throughout your campaign
to make sure you're delivering the intended value.
In content marketing,
it's rare that you only use one tactic.
During any given campaign,
you may leverage a variety of channels and tactics
to make sure your content is seen by your ideal customer.
So how do you know which tactic is truly best
at driving results?
This is why you should evaluate the ROI
or return on investment of each tactic to determine this.
To calculate ROI,
divide your net profit of the marketing tactic
by the marketing cost for that tactic.
Let's walk through an example
on calculating the ROI of a tactic.
Red30 Tech's marketing team is spending $300,000
to promote their latest IT support services.
Here's how costs are split across the tactics.
Social media ad costs are $175,000,
telemarketer costs are $75,000,
and direct mail costs are $50,000.
Next, they look at sales for each tactic
to determine the net profit.
Social media ads generated $500,000 in sales,
telemarketing resulted in $250,000 in sales,
and direct mail drove $200,000 in sales.
Using the ROI formula,
they know net profit for each tactic is as follows.
Social media ads resulted in $325,000 in net profit,
telemarketing resulted in $175,000 in net profit,
and direct mail resulted in $150,000 net profit.
Finally, they can determine the ROI for each tactic.
Social media ads resulted in 185% ROI,
telemarketing resulted in 233% ROI,
and direct mail resulted in a 300% ROI.
Reviewing the three tactics,
the marketing team sees that direct mail
has the strongest return on investment,
followed by telemarketing and social media ads.
Based on this data,
they decide to continue investing in all three tactics
and increase their investment in direct mail
to see if they can maximize its strong ROI.
Calculating ROI for each tactic you invest in
is good practice because it lets you compare return
for the tactics and invest more or less,
depending on its ROI.
Do this throughout your campaigns
and you will see how this impacts your decision to spend.
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