The question of whether your marketing automation campaign is truly delivering results is a familiar one.
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Weโve all been there sitting at our desks when the boss pops in and asks that seemingly simple question: “How do we know this marketing automation is working?”
It’s easy to assume that if people are clicking through the links then the campaign is successful.
But the real measure of success goes beyond mere clicks.
It’s about understanding if your efforts are generating a positive return on investment (ROI). In other words are you making more money than you’re spending?
Unveiling the ROI of Your Marketing Automation Campaign
Let’s be honest many marketers struggle to quantify the short-term impact of their marketing spend.
But don’t fret! With a bit of calculation and metric tracking you can unlock the secrets to your marketing automation campaign’s true ROI.
Step 1: The Foundation – Understanding Customer Lifetime Value (CLV)
The starting point for any ROI calculation is understanding your customer lifetime value (CLV). It’s like looking at a customer through a long-term lens seeing how much revenue they generate for you over their entire relationship with your business.
Imagine you run a SaaS company with a monthly subscription fee of $20 and the average customer stays with you for 24 months.
Your CLV would be $20 per month multiplied by 24 months giving you a total of $480.
Now if you’re in a business that doesn’t involve monthly subscriptions like a swimming pool installation company the CLV is even simpler.
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It’s the revenue you generate from selling the product once.
For the pool company it would be the revenue generated from the average pool installation.
Step 2: Driving Prospects to Your Website – The Path to Conversion
Once you’ve calculated your CLV the next step is to bring those potential customers or prospects to your website.
Think of it as a funnel – you want to attract prospects to the top nurture them through the middle and guide them to become customers at the bottom.
The Power of SEO and Paid Advertising
Most businesses are familiar with search engine optimization (SEO) which helps you improve your organic rankings on Google and other search engines.
But with everyone striving for those top spots it’s essential to find ways to stand out.
This is where paid ads come in.
Combining free organic search with strategic paid traffic creates a powerful duo that can set you apart from the competition.
Platforms like Google and Bing make it easy to set up paid campaigns and you only pay when someone clicks on your ad.
Social Media Advertising: Target Engage and Convert
Social media platforms like Facebook Instagram Twitter and Snapchat provide a powerful platform for reaching your target audience.
You can get incredibly granular with your targeting focusing on specific demographics interests and even geographic locations.
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Imagine you want to reach mothers between the ages of 25 and 34 who live within a 25-mile radius of your business and enjoy playing tennis.
With a few clicks you can tailor your ads to reach exactly those individuals.
Paid social media advertising is a great way to boost your organic SEO efforts and connect with your ideal customers.
Step 3: Creating a Customized Landing Page – The First Impression
When someone clicks on your ad where do you send them? It’s tempting to simply direct them to your home page but a more effective approach is to create a customized landing page tailored to the specific message of your ad.
If your ad says “Buy Green Widgets Here!” people are going to expect to see green widgets when they click through.
Sending them to your home page that doesn’t feature green widgets will leave them confused and likely to bounce.
Nurturing Prospects with a Newsletter Signup
Some businesses prefer to build a relationship with prospects before trying to convert them.
If this is your strategy you can direct them to a landing page where they can sign up for your newsletter.
This allows you to gently nurture them through the sales funnel gradually building trust and rapport before they become customers.
The Importance of Landing Page Optimization
After creating your landing page it’s time to test different versions to see which performs best.
You can experiment with things like headlines copy graphics and buttons.
The key is to only test one variable at a time.
If you change multiple things at once you won’t be able to determine which change caused the impact you’re seeing.
Step 4: Understanding Cost Per Sale (CPS) – The Price of Conversion
Now we’re getting to the heart of ROI – your cost per sale (CPS). It’s essentially the amount of money it costs you to convert a prospect into a customer.
In simpler terms how much do you have to spend to gain a new customer?
Setting a Realistic Cost Per Sale
A good starting point is to aim for a cost per sale that’s about 10% of your customer lifetime value.
Let’s go back to our SaaS company with a CLV of $480. Ideally their cost per sale should be around $48. This means for every $48 spent on marketing they should acquire one new customer.
Navigating the Cost Per Sale Calculation
The real-world calculation of CPS can be more complex.
Imagine your website receives 20000 visits per month (or 240000 visitors per year) through organic and paid traffic.
From this traffic you might get 500 new newsletter sign-ups each month resulting in 6000 new subscribers annually.
But the question is how many of those subscribers actually become paying customers? On average about 1% of your newsletter subscribers might convert into customers each year.
So out of 6000 subscribers you could expect 60 new customers.
Let’s break down the math:
- Total Revenue: 60 new customers * $480 CLV = $28800
- Cost Per Sale: $28800 / 60 customers = $480
This sounds like a good budget but remember there are other costs involved.
For instance your marketing automation platform might cost around $1750 per year for 20000 subscribers.
Add in paid advertising costs of $1000 per year and you’re already looking at $2750.
If you handle web design and other marketing needs in-house you’re likely within budget.
But if you need to hire outside help to create ads landing pages and other marketing materials costs can quickly add up.
Viewing Marketing Automation as an Investment
Think of your marketing automation campaign as an investment.
Based on the example above if you spend $1 on marketing automation and related costs you could potentially generate $10 in revenue.
While this looks promising remember that things are always simpler in theory than in practice.
Continuously track your results and make adjustments as needed to ensure your marketing automation is maximizing its potential.
Embracing the Power of Marketing Automation
It’s one thing to read about calculating the ROI of your marketing automation campaign; it’s another thing to put it into action.
Embrace concepts like customer lifetime value conversion rates and cost per sale.
By understanding these concepts and actively using them you’ll be able to answer your CEO’s question with confidence: “What’s the ROI of our marketing automation program?”
Remember your marketing automation campaign is not just a series of tasks; it’s an investment in your business.
By focusing on its ROI you can make sure it’s delivering real value and driving your business towards success.