Can you calculate the ROI of your direct marketing campaign?

On March 29, 2016

Whenever you are spending in business, it is important to track whether the cost is worth the results.

Investing in marketing is very different from investing in technology or human resources, because usually the more you spend, the greater the potential returns. However, the elusive notion of ROI can be difficult to calculate.

So to ensure that you are calculating accurate outcomes for your direct marketing campaign, there are a few steps to complete first.

A promotional code works to encourage customer purchases, but it also helps assess the outcome of your campaign.

Plan to track results

The first step to achieving an accurate measure of your campaign's success is by integrating a way to track it. One of the best ways to do this is as simple as including a promotional code.

This works doubly to encourage the recipients to buy from you because of a special deal or other offer, and to help you assess whether the purchases were instigated by the campaign or not. This method will allow you to easily calculate not just the sales or donation leads you have created, but also an accurate measure of the profits.

Compiling the right figures

You'll need to compile a few essential numbers to calculate your ROI before and after the campaign.

The easiest to calculate is the campaign audience size and its overall cost. Your audience size is how many units you send out, but the campaign costs may involve some deeper investigation. This includes the design and preparation time, as well as labour and delivery costs. If you have used a graphic designer or purchased a mailing list, then this comes into the investment as well.

So now you have your audience size and your campaign cost, here comes the tricky part.

Using your tracking method (i.e. the promotional code), diligently compile all of the leads you receive and the associated sales you have generated. This can be done electronically, so setting up a process to do this efficiently prior to your campaign commencing will make this more fluid and accurate.

Knowing how successful your direct marketing campaign was will help guide you on how much to invest in the next one.
Knowing how successful your direct marketing campaign was will help guide you on how much to invest in the next one.

Getting to the final ROI

With these figures, you can measure your profit. Simply subtract the campaign costs from the total sales your campaign generated and you will have a clear indication of whether you achieved a profit or a loss. With this profit/loss number, you can very easily figure out your ROI.

The basic formula is profit generated divided by the campaign cost. Generally it is reported as a percentage, so if you spent $500 dollars and made profits of $2,000, then your ROI would be 400 per cent.

It's as simple as that.

If you want to find out more about how direct marketing can benefit your business, get in contact with The Prospect Shop today.

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