Importance of Defining Customer Value for Calculating Marketing ROI

Too many businesses spend on marketing without knowing the value of a new customer. Define the value of a new customer and evaluate the return on investment (ROI) of your marketing spend to determine if your efforts are working. If marketing costs are higher than the new business it generates, rethink and optimize your strategy.

Simple budgeting tells us that we should always spend less than we make, so why do so many companies spend so much on marketing without knowing the value of a new customer or without intensely tracking every lead that comes from their marketing efforts?

Lack of time is the most common reason companies don't track their marketing efforts as closely as they would like. They either setup a Google Ads campaign and do the best they can to track their efforts, or they hand over the keys to a marketing firm who tracks a range of data, but not true conversions. Both of these scenarios are lacking in a primary data point: tracking return on investment (ROI).

ROI is the key data point of how a campaign is performing, not impressions or clicks. "Am I getting a return on my investment? I've paid $X a month to Google Ads, so how much business has that brought in?" These are the simplest questions any business should be asking their marketing team, and though they seem common sense, many marketers don't track the data to answer these questions.

How to Track ROI

Tracking ROI can be as simple as “A company spends $X on marketing and gets $Y in return.” The hard part comes with tracking the customer's journey from the first click of an ad by a customer to the final appointment request, phone call or online purchase.

The easiest way to track phone call conversions is with a call tracking software, such as CallRail. This allows you to track specific calls from specific campaigns, such as a visitor who called the business after coming to the website by clicking on a Google ad, or a visitor who found the business organically on Google search and made a call. Call tracking software makes this incredibly easy to setup and manage, though all calls should be recorded, monitored and tracked as the customer goes through the sales cycle to determine what marketing campaign, if any, actually lead to a new customer.

Website form fills, such as contact forms and appointment requests, can also be tracked by using specific landing pages for each campaign. By cross-referencing the completed forms with your new customer list, you can verify who has converted into a new customer. *This situation only refers to companies who can track and manage user information.

Finally, if you have direct-customer interaction, simply ask how they found you. Though this is the least analytical method, it’s the most direct. If someone says they found you on Yelp, and you are running ads on Yelp, then that’s fantastic news. Your efforts have paid off. If someone says they found you in a Google search, and you’re actively running SEO and Google ads, then that’s great news as well. Your efforts are working. The only downside to this method is that someone can say they found you on Google but really received a coupon or saw an ad on Facebook, but did a Google Maps search for you, therefore the last touchpoint for the customer was Google.

No matter what, you got a new customer from a digital campaign, which is cause for celebration, but creating focused campaigns with tight tracking parameters is your best method for truly tracking ROI.