What is a Good Return on Investment for Advertising?
ROI And Advertising: Give me $1, I’ll Give You Back $10
Everyone knows that advertising your business and brand is important. It gets you in front of new eyes, builds your reputation, and, ultimately, gets you more sales. We all know this. However, the thing that we don’t know—especially if you are just getting started in the advertising game— is exactly how much we should be budgeting and spending on advertising. You need to change your mindset; advertising and marketing are not spending; it is investing in your brand and sales. Do you get better results with the more money you spend? We’re here to tell you that advertising is one of the best ROI’s you can get for your business, no matter what it is you’re selling. We have seen ROIs of up to 20x with some of our clients, which is why we’re writing this blog to spill our secrets. Keep reading to learn more about ROI and Advertising and all the different ways you can use money to boost your brand.
Why is ROI the Ultimate Metric for Advertising Success?
ROI stands for Return On Investment. This metric helps companies, brands, and marketers measure the effectiveness of all the advertising efforts they create. By spending a little money to get new customers, you will, ultimately, get back all the money you paid and then some. It is a win-win for you, the company, and us, the target audience.
Why You Should Measure ROI
There are four main reasons you should be measuring your advertising ROI:
Get Data
Making informed decisions is the backbone of all marketing strategies. Gathering data is how we, as marketers, are able to do it. By measuring your advertising’s ROI, you can make great decisions moving forward regarding where the best place to put your money is and how to save money in other areas that don’t seem to be working well.
Track Performance
Want to try a new special, offer, or release a new product? By tracking your advertising ROI, you will be able to see how it all goes. How did your Black Friday deal do last year? Let’s take a look at it and see how we can make it even better this year, whether it’s anything from the offer itself or the creative pieces used to advertise it.
Measure Success
Did your Black Friday deal do really well last year and you are happy with the results? Great! Let’s run a similar deal again this year, and up the budget a bit to get even better results. Measuring successes is a great plus side of tracking your advertising ROI’s, including being able to show them to company stakeholders and investors.
Plan for the Future
Using the same example as the Black Friday deal, measuring advertising ROI is a great tool to help you plan for the future. Many major companies and brands plan their advertising efforts well in advance—up to a year in advance—and looking back at past successes and areas for improvement helps give marketers the ability to make this plan well in advance.
The Basic Formula for Calculating ROI
Return on investment (ROI) is a ratio that measures the profitability of an investment by comparing the gain or loss to its cost. It helps assess the potential return of investments on things like stocks or business ventures. ROI is usually presented as a percentage and can be calculated using a specific formula, according to Investopedia.
ROI=
Cost of Investment
Net Return on Investment
×100%
- ROI is calculated by subtracting the investment’s initial cost from its final value, dividing this new number by the investment’s cost, and finally multiplying it by 100.
- ROI has a wide range of uses. It can be used to measure the profitability of stock shares, to decide whether to purchase a business or to evaluate the success of a real estate transaction.
- One disadvantage of ROI is that it doesn’t account for how long an investment is held.
Key Strategies for Maximizing ROI
Ready to really maximize your advertising ROI? Here are the key strategies for doing so:
- Set goals. What are you looking to achieve with your latest advertising campaign? Gain new customers, sell more products, or get the word out about your new online appointment calendar? Pick a specific goal to track ROI with.
- Understanding your audience. Truly understanding your target audience is going to help make some seriously informed decisions about where to best put your advertising spends. We’ve written lots of blogs about zeroing in on that, including this target audience blog and learning about empathy mapping.
- Benchmark. In order to see how well (or not well) your advertising efforts are performing, it is important to first set some benchmarks. Pay most attention to the right ones that align with your goals and check them against your competitors, as well.
- Get creative. Once you’ve done the legwork, it’s time to get creative. Making content is the fun part of advertising. Throw out some ideas to try, check them against your data, and get as creative as possible!
Targeted Advertising: Reaching the Right Audience
As mentioned, understanding your target audience is going to inform a ton of your marketing decisions. This includes where to advertise, what to say, what colors to use, and so much more.
Understanding your Customer Lifetime Value is also a key element for advertising planning. Customer Lifetime Value refers to, basically, how much your customers love you and are loyal to you. Do you get a lot of repeat customers? Do you often hear that a customer was referred to you by another customer? If so, you need to start tracking your CLV, because the larger a customer’s lifetime value, the less you need to spend on your customer acquisition costs.
Content that Converts: Crafting Compelling Ad Copy
One of the most important parts of advertising, which is also the most difficult yet also the most fun, is creating compelling ad copy that actually works. If you are able to hit the nail on the head, your ROI will explode. If you totally miss the mark, you can do some damage to your brand. So, how do you find that sweet spot?
Some tips for creating compelling ad copy that converts are:
- Know your audience and how to speak to them. You would talk to a CEO or other high-level decision-maker much differently than you would to a 15-year-old. You would find them in different places, use different languages, and craft your copy according to them.
- Try, try, and try again. Just create something, see how it does, and improve from there. Can’t decide what to choose? You can also try A/B testing to compare two different sets of copy and go with whichever one is performing better.
- When all else fails? Using a professional copywriter who has proven previous success will help you get started on the right foot, especially if you have no idea where to begin.
Innovative Techniques to Boost ROI
There are many great ways to boost ROI for your advertising efforts, including taking advantage of the latest and greatest technologies and innovations. Some of these include:
- The Power of Personalization in Advertising. It’s been proven that people love a personal experience. That is why email automation includes the first name of the customer, Amazon presents you with things you might like based on previous purchases, and apps ask you to use your data to give you a better experience. The more personal you can get, the better the results you will have.
- Using AI and Automation to Optimize Campaigns. Workflow automation has made things easier than ever when it comes to advertising, including email automation, sales funnels, online appointment-setting, bots, and much more.
- Interactive Ads to Engage Your Audience Like Never Before. Audiences love things that are creative and capture their attention, including ads that are interactive. If there is a fun and great way to capture their information—whether an email address, phone number, or their name—seize the opportunity.
Measuring and Analyzing ROI
As you’ve learned in the blog, measuring and analyzing ROI is important for many reasons, but how exactly do you do it? Here are some tips:
- A great rule of thumb for marketing ROI is a 5:1 ratio. Spend $1, get $5 back. A really great ROI can be as high as a 10:1 ratio or even a 20:1 ratio (which we have seen!).
- Anything below a 2:1 ratio is considered not profitable, but still important to inform future campaigns of what NOT to do.
- Take advantage of tools that can help you track, measure, and analyze your advertising spends. Some tools include Google Analytics, Cyfe, SEMrush, Kissmetrics, and Ahrefs, among many others.
Common Pitfalls in ROI Analysis and How to Avoid Them
Now that you’ve run your advertising campaign, got your ROI reports, and are ready to analyze them, here is what NOT to do:
- Forget your goals. With every advertising campaign, there will be successes on some metrics and failures on others. Knowing which metrics to care about and which you can essentially ignore are keys to aligning your analysis with your goals.
- Check too soon. It is important to make sure you track and measure ROI over time. Even though a campaign ran for just one week, it is important to wait it out and see how the customers you capture move through your sales funnel. Reporting too early can make it seem like a failure when, really, it was a huge win.
- Present it incorrectly. Make sure you are presenting your ROI analysis correctly to stakeholders and investors so that they clearly understand the campaign’s objectives, goals, and reasoning. Showing too broad of a scope can be misleading.
Boost Your Advertising ROI with Navazon Digital
The best, sure-fire way to get a great ROI on your marketing and advertising efforts is to bring in the professionals. At Navazon, we are experts in all channels of advertising.
Navazon helps businesses increase profits through data-driven marketing that expands opportunities and reduces risk. As marketers and entrepreneurs, we understand the value of developing a memorable brand through creativity and consistency. This is accomplished through targeted graphics, videos, and websites that reflect our proven, time-tested methodologies and detailed analytics. This approach has proven effective for companies of all sizes, from start-ups and medium-sized businesses to large firms with an international presence.
We are content creators who listen to our clients so that we can formulate ideas and strategies based on your unique goals and philosophies. Thinking through those goals with our analytics-based approach, we study not only your tendencies but those of your competition and the market as a whole.
Equipped with this knowledge, we develop a powerful plan, test it and then roll it out on a modest scale. Once we arrive at the winning formula, we can scale up rapidly to meet even the most optimistic growth projections.
At Navazon, we do not believe in “one size fits all.” Every part of the marketing plan is customized to address your unique niche and positioning strategy. It’s how we excel. It’s why we succeed.
Schedule a free consultation with us now! Visit us at navazondigital.com for more information.