December 28, 2021
One of the most important calculations you can make as a marketer is determining the marketing ROI of specific, as well as global, activities: Quantifying what works and what doesn’t.
Before we begin to look at the basic ROI formula, it is important to settle some terms:
The question is not how much something costs, but what return you received on your investment. Another question, of course, must then be asked: What would our return look like if we invested more?
For the first example, let’s assume you spent $75,000 on an ad campaign that included both digital and traditional media to recruit talented and gifted (TAG) students and the campaign generated 19 TAG students.
You know that your average net tuition revenue per TAG student is $23,000. The campaign generated $437,000 in revenue and had an ROI of 580 percent. The calculation is the net return of $437,000 divided by the investment ($75,000) X 100.
The math is even easier on the fundraising side. Suppose you spent $140,000 on a direct marketing campaign (social, email, postal, and spot telemarketing) that generated $860,000. Using the same formula, your ROI for this campaign is 614 percent.
Global numbers are useful because they offer easy comparisons. However, if you look below the surface you will find it is often difficult to calculate return on specific investments. For example, let’s say you spent $500,000 on brand building, $1 million on direct response, and $300,000 on special events. A total of 100 new students enrolled.
Unfortunately, ROI can’t pinpoint, with a high degree of confidence, the contribution of each activity under that $1.8 million investment. You can compare overall investment YTD, but not much else. For this reason, most institutions use ROI calculations that focus on specific campaigns or activities.
The ROI for a campus visit program is more straightforward:
Let’s say you spent $235,000 on your campus visit program that included list buy, social media, email, postal mail, and event hosting. The program generated 376 student visitors (at $625 per visitor).
More detailed ROI calculations can determine which contact list was most effective or whether the campaign was more effective with specific student segments based on ability, geography, program of interest, etc.
The ability to routinely gather and evaluate ROI is one of the most important building blocks of marketing success. Institutions making these calculations will have the tools to monitor and improve performance.
The key is to use the same definitions each time you make the calculation. If you don’t, a clear understanding of your total spend will be difficult and meaningful comparisons will be impossible.
Measuring ROI is not a one-and-done endeavor. Once you take the time to identify the inputs (and outputs) you will also need some patience to demonstrate value. You may discover cyclical effects or document lengthy ramp ups. For any ongoing initiatives, give the ROI measurement at least a year to capture anomalies and longer-term patterns.
Contact me to discuss your marketing strategy and your ROI measurement successes and challenges.