ROI Calculations Provide Value to Businesses

Knowing The ROI Of Each Marketing Initiative Allows Business Owners To Know Their Relative Effect On Sales And Ultimately Business Growth

As the economy continues to tread water and remain stagnant with moderate consumer spending, many companies begin cost-cutting measures. Spending cuts always seem to begin with marketing expenditures. Small business owners are being forced to only use operating expenditures that produce quantifiable results and directly influence growth. The ability to accurately determine the return on investment (ROI) for a given initiative has become increasingly important in order to be able to provide value to businesses.

For a business owner, knowing the ROI of each marketing initiative also allows them to know their relative effect on sales and ultimately business growth. There are three keys that all owners must follow in order to accurately track and report the ROI for a marketing campaign. First, there must be a system in place that can enter and qualify leads so that they get distributed to the necessary sales personnel in a timely manner. It is important to qualify leads so that sales people are able to prioritize leads based on their needs and potential value. The qualification process is going to utilize a different set of criteria depending on the industry.

A key determinant in determining the qualification of a sales lead is the timing that the potential consumer is looking to buy. One of the easiest ways to evaluate and prioritize leads is by the time expected from first contact to purchase. A salesperson is going to need to focus on prospects that could bring revenue into the company in the shortest time. This system needs to continue to track the lead once a sales person has evaluated and executed it to its fullest potential. It needs to record whether the sale led to any source of revenue or was non beneficial to the company financially

The second key for tracking ROI is having quality expense reporting. The second component in the return on investment formula is expenses, so it only makes logical sense to treat it with a high priority. Usually expenses are easier to track for companies since payroll and invoices provide concrete data associated with specific campaign related costs. The more difficult aspect is quantifying the accumulation of soft costs associated with each campaign. To achieve a more accurate ROI, a more accurate assessment of the related expenses must also be achieved.

The third key is for company-wide compliance to be an initiative. The best way to accomplish this is to create an effective training session for all persons involved before the campaign starts. This way everyone will effectively be on the same page and have an understanding of the cohesiveness and synergy that is needed. Also, it provides each individual their specific role and duties that are going to be expected of them. This ensures an accurate tracking of leads, their revenue, and expenses associated with each specific marketing function. This also allows ROI to be easily and accurately formulated which in turn provides owners with quality data from which to make an informed decision.

Business owners have always been aware of the importance of allocating expenses to allow for the most efficient path to company growth. During economic downturns and mediocrity, the importance and value of each dollar spent gains importance. The best way to ensure a business owner is getting their maximum result with each dollar spent, an ROI development system is crucial and can provide growth during more difficult times in which consumer spending is low. As the economy improves and revenues climb, the improvement in efficiency will become even more apparent as it compounds and allows for an even more improved bottom line. HBM

Nick Overmann is a veteran marketing professional with corporate experience in the electronic payment, telecommunication, and construction industry. Utilizing his diversified marketing strengths, he is the founder and President of Oveer Marketing, a marketing agency designed specifically for small business’ needs. Visit or email