Finance and Accounting

Marketing to the Bottom Line

Consumers and customers are bombarded daily with marketing messages from many sources. There is an ever increasing number of media and marketing channels and the discovery of new medium seems to be a regular event. All too often overexposure and consumer resistance see the majority of these messages fail to reach their intended targets. The result is money down the drain.

Marketing is an investment and like any investment a company wants to see a return on that investment. As an investment marketing campaigns need to be measured, monitored and compared to other investments to ensure the money is spent wisely.

In basic terms marketing return on investment (MROI) is the profit after cost of sales (not revenue) you can expect from the marketing money outlaid. This return is usually calculated as a percentage, in simple terms:

 (Profit - Investment)  e.g.  $2,500 profit on a $2,000 investment  =  2,500 - 2,000  = 25% ROI
Investment  2,000

Calculation can be complex with many variables both on the investment side and return side. Think about all your costs involved, your time is a cost as well as the direct investment in the campaign or webpage. In order to calculate this ROI the return directly attributable to that investment needs to be calculated and this is not always straightforward. Different styles of communication have different levels of measurability, from brand advertising being the most difficult to direct marketing which is easier to measure and online marketing being the optimal for measurement. Whilst measurement may appear to be difficult you can build mechanisms into your campaign that can aid this measurability such as;

  • Different phone numbers
  • Different URLs
  • Specific coupons or offers
  • Text for info
  • Direct questioning - "how did you hear about this offer?"

A business should regularly review its marketing strategies and ask the following questions:

  • How much do I actually spend on marketing by different objectives, geographies, and product lines?
  • How effective is my marketing spend?
  • Where could I trim spend without negative profit impact?
  • Where should I invest more to generate optimal returns?

Is it worth the energy, time and effort to track MROI? Studies show that a typical company can expect 5% to 20% benefit either as improved revenues, decreased marketing spend or a combination of both. The insights gained from understanding the impact of different marketing strategies can help marketers to estimate expected sales, know where to increase or decrease advertising investment and produce greater sales at the same cost.

For more information call Ross Wakelin on 0432 302 774 or This email address is being protected from spambots. You need JavaScript enabled to view it..

 

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