Do you know what you are really measuring?

At first glance, measuring the success of your business is easy. You are in red or black at the end of the year. Measuring the success of each marketing program is ultimately related to the overall success of your business. If your marketing plan doesn’t work, you’ll see a lot of red ink. More and more VARs are finally realizing that they must have a way to measure the return on investment of each marketing program. It’s no different than having a system of “checks and balances.” If it works fine, why? If not, why not?

Do you really understand the meaning and value of ROI? Sure, you measure the success of your cooperative programs/Marketing Development Funds (MDF) and base your ROI on activity. You communicate your ROI through your channel partners. You realize that better ROI tracking is needed and want to measure the success of your business in ROI, based on revenue. He even acknowledges that you should have a way to track ROI for every program and promotion. However, at the end of the day, you may not have a clear ROI!

Why is this? Based on the constant buzz about it, we know that ROI is important, but simply attaching a way to measure the effectiveness of each program doesn’t guarantee that it will produce clear results. Do you understand what you are (or should be) actually measuring? Have you planned and executed programs so that you can actually measure them? If you are asked to justify your programs and promotions, do you have the tools and resources to show your program goals, activities, and results in a positive light? If not, you have to build something pretty quick to keep those programs off the chopping block.

Your survival may depend on how well you can measure your success.

Here are some steps to set up a simple ROI scenario for your marketing pieces:

– Determine the cost of the individual program, promotion, brochure or marketing item, and do this for each program and marketing piece. Include all expenses involved in bringing this program to fruition, such as labor costs and branding costs (PR, advertising, website initiatives); and print, web/email, and direct mail costs.

– Determine the potential number of impressions of each piece on the drawing. How many brochures will you mail? How many people will receive your email? What is the circulation of the newspaper or magazine in which you are advertising or submitting your press release? If you can’t quantify something, use “0” impressions, but include the cost of this in your equation.

– Calculate the response rate you could receive for each part of the program. Based on past history, you may have this information. Otherwise, take a guess (ie, an average of 15 percent of recipients open your email blasts). See the Direct Marketing Association’s Response Rate Trend Report for more detailed information.

– What are the annual sales of each client with you? Know the dollar value that your client has within your company based on annual sales.

Using this information, you can now create a formula based on how program spend compares to number of impressions and perceived response rate. Create estimated total revenue, subtract your expenses, and voila, you have your ROI.