As a business owner, you know your business needs marketing to survive and grow, so you spend money on it. But how do you know what comes back?
Without the right tracking, marketing can feel like throwing money into a black hole. A new customer calls, but was it your Google Ads that brought them in or a recommendation from someone’s grandmother? How do you track your marketing efforts and know whether they’re paying off? That’s where ROI comes in.
But what exactly is ROI in marketing? Let’s discuss.
What is ROI in Marketing?
ROI stands for Return on Investment. And when it comes to marketing, you want that number to be positive.
The basic formula is:
Marketing ROI = (Revenue from Marketing – Marketing Cost) / Marketing Cost
Think about it this way. You own a landscaping company and spend $1,000 on marketing. That marketing brings you $4,000 in new business. Yes, it cost you money to get those customers, but there is still money left after the marketing expense. Your investment came back with more attached to it.
That’s what you want to see.
If you keep spending $1,000 and only bring $700 back, there’s a problem. And if your marketing eats up nearly everything you make from the customers it brings in, that deserves attention too. Nobody wants to work just to feed the marketing budget.
ROI helps you see whether the money you put into marketing is actually coming back and how much it brings with it.
This becomes especially important when you’re working with a digital marketing agency. At Madroit Marketing, we track the results and show you the numbers behind our work. You can see what your marketing is producing instead of simply taking our word for it.
What Should You Track to Understand Your Marketing ROI?
Now that you know what ROI is, you need the numbers to calculate it.
Start with the basics:
Revenue generated. If customers can purchase from you directly or shortly after contacting you, revenue is one of the clearest numbers to watch. It tracks how much business came from your marketing compared with what you spent to generate it.
Opportunities created. Revenue doesn’t always happen right away. If you have a longer sales process, one marketing campaign may bring you a qualified lead today that doesn’t become a customer for another three months. In this case, you also need to track how many real sales opportunities your marketing creates and what eventually happens to them.
Marketing spend. This gives those results context. Know how much you’re investing in each marketing channel so you can compare the cost with what that channel is producing.
At the next level, you can use your CRM to track Customer Acquisition Cost, Lifetime Value, and conversion rates. These metrics give you a deeper look at what happens after marketing brings a potential customer into your sales process.
How Do You Know Which Marketing Activity Brought the Customer?
You may know that you spent $5,000 on marketing and brought in $15,000 in new business. Great. But that $5,000 may have been split between Google Ads, SEO, email marketing, and social media. Which one actually brought in the customers?
To answer that, you need to track the path customers take before they contact or buy from you. How you do it depends on the way they reach your business:
- UTM tracking links help when you send people to your website from digital ads, emails, social media, or other online campaigns. They show which source brought the visitor in.
- Dedicated landing pages work well when you run a specific campaign or offer. You can see how many people reached that page and what they did next.
- Promo codes or unique offers make sense when customers purchase directly. A code used at checkout can connect that sale back to the campaign.
- Call tracking is important when phone calls are a major source of new business. A unique number can show which ad or campaign made the phone ring.
- CRM tracking becomes especially useful with a longer sales process. It lets you follow an opportunity from its original marketing source through to the final sale.
Which method you need depends on how your customers find and contact you. The important part is to have it ready before the campaign starts. Otherwise, you may get the sale without knowing what brought it in.
How Much Should You Spend on Marketing?
Once you know what your marketing is producing, you can make a better decision about how much to invest in it.
Your stage of business gives you a general starting point:
- Startup, 0–3 years: around 10% to 20% of revenue
- Growth stage, 3–7 years: around 8% to 12% of revenue
- Established business, 7+ years: around 5% to 10% of revenue
These percentages aren’t fixed. Your industry and competition can move the number. The amount you need to invest also depends on how quickly you want the business to grow.
Then bring ROI back into the decision. If a marketing activity is producing profitable business and has room to grow, it may deserve more of your budget. If you’re putting money into something without getting enough back, find out why before continuing to fund it.
This is where Madroit Marketing Agency can help. We look at your results and your business goals before recommending where your marketing budget should go. The percentage gives you a reference point. Your own numbers tell you what makes sense for your business.
Conclusion
The more you know about your marketing results, the better you can adjust what you’re doing. ROI gives you that information. It shows what your investment is bringing back and helps you get more from your marketing over time.
That’s why analytics is a big part of how Madroit Marketing Agency works. We insist on tracking ROI because we want to know what is happening with our clients’ marketing and where we can make it work better. You get a clearer picture of your results, and we get the information we need to keep improving them.
Want more clarity and better results from your marketing? Contact Madroit Marketing and let’s get to work.
