What is a good Marketing ROI and How to Calculate

In this video, we're going to discuss marketing return on investment ROI and how to calculate it and what is actually good. So an average return on investment is about five times what you spend. So if you spend $2,000, you should be getting 10,000 back. A good marketing campaign should produce 10x return, and that is a very good campaign. And most of the times that's what people shoot for. 5x is not bad though, because you spend 2,000 and you get 10,000, for example. And the way to look at this is that if you get $10,000, about 20%. So 5x20% of that is going towards the marketing channel. And so again, that's not bad, that's about average. But that 10x is really good. And so I'm going to show you how we calculate that and how we try to come up with numbers for our clients so that we can show a true roi. If you're currently working with a digital marketing company, hopefully they're able to reduce something that looks like this. And if you're just doing this by yourself, I'll give you some tools that you can utilize as well. So there's two parts of marketing ROI that we want to look at is the first one, which is visibility. So generating leads and overall visibility of an roi, and then truly a sale of an roi. So we see this as marketing companies, I'm sure that you've seen this before. And other marketing companies see this all the time, which is, hey, we can reduce leads for you, but if you can't convert the leads into sales, then is that our fault for bad leads or is it your fault for not closing? It's the conundrum that we always find ourselves in. So for visibility specifically, I'm going to show you how we calculate lead roi. And then for sales, I'm going to show you how we calculate that as well. So the first thing that we want to do is look at all the channels that we can create visibility on. And so the two that we always look at is your off site SEO and your on site SEO. So your off site listings and your on site website traffic. So off site is something like your Google Business profile, your Yelp account. People find you on Facebook and they call you from Facebook. It's hard to track on your website if people are calling you from all these other places. So one thing that people do is they put tracking numbers on all these different profiles. That is actually not a good thing to do because it messes up all of your citations and your name, address and phone Number is not accurate. So we actually go in and pull that data. At each location they give you a dashboard. So I'm going to show you one. For example, so Google, if you log into your Google Business Profile, they have a performance tab and then they show you over the last 28 days how many, let me make myself smaller. How many calls and website visits? So we don't attribute website visits to actual leads because we do that for website traffic. And I'm going to show you how that works. But calls, we could say that about half of these are actual calls from prospects, for example. We don't like to say that all of them are because maybe people are asking questions that have been prior customers or maybe you're currently working on their stuff and they're calling you. Each business is different. You kind of know your business. Like for example, if you have a long span, like let's say restoration contractors, you could be working on their stuff for six to 12 months, right? So it's harder to count those calls as leads. Whereas a furniture restoration company like this, maybe half of them are. If you're like a carpet cleaning company, maybe it's a higher percentage because it's a quicker turnaround time. So let's say that this is. Half of these are calls from Google Business Profile are leads. We know that their average transaction value for Google specifically is, is about 2 to $3,000 per customer. And I'm going to show you how we find that out. But you might know in your business, if you use like QuickBooks, you can figure out what your average invoice amount is. So for them, let's say that their Google business profile, 21 calls, let's say 10 of those are actual prospect calls. And their average transaction value is $2,000. So that's $20,000 potentially in leads that have come through. And one of the things, I made a video about this before, but we have this simple lead tracker. We made this just to help people if they're not super high tech with CRMs and all that stuff. Basically, we take this month, let's say this is the current month. We put in the name, the estimate amount, what the status is, who the employee was that wrote it up, this next step and then the lead source, what it does is it shows you this Team A, you could rename this to, you know, Phil or whatever your employee's name is, and then it will give you total estimates. And so what this will show you is your average estimate amount. So you can kind of build a history of this and Then if you want to duplicate this and move it to the next month, so that way you could have like June, July, August, September. It allows you to see your average estimate. So this is a cool estimate tracker. There's another video, I'll link to it down below and you can go, and you can actually download this if you're, if you're interested. But this is the second part to it. So we talked about the lead roi. So we know that the Google Business Profile manager has generated potentially 10 leads. And we know that their average transaction value based on them using some type of lead tracker or invoice estimate, we know that it's $2,500. So if it's 10, 2500, we know that's the number. Then the second part to that is actually looking at what realistically closed. So this is still pending. If we say yes, then it's going to move this to our closed business. And so this is really the true number that should be at 10x what you spend because you don't necessarily just want leads coming in that you're not converting. And that's why I said it's a moving scale of 5 to 10. And so the other thing that you can do. So this is your Google Business profile. This is where leads come in for local service businesses. You also have a Yelp account. Leads can come through that, that they can just call and click and Facebook, Angie, HomeAdvisor, they all have different dashboards that you want to look at if you're running ads on those platforms. Again, you want to have some way of keeping track of that. The second part to this is actually your website. So this is the same company, this is their website. This is over the past 28 days. So similar metrics. So we can see that these people, yes, went to their website, but how did they interact with the website? And we can see that five people filled out a estimate form. Those people probably aren't the same ones that called them because a lot of times people either just call or they fill out a form or they go to your website and they do a mobile call or they do a chat on your website. So we know that this company had five forms, five chats and four calls, which is 14 leads. And we also know that their average transaction value is $2,500. So again, 14 times 2500, that is whatever, $20,000, some $30,000 plus their Google business profile, which is 10 leads. And so this is over a 28 day period. So as you can see, this company's performing very well from a return on investment perspective, considering what they're paying us. And so that is one thing that you have to look at is what you're paying versus what the actual return on investment is. If your digital marketing company is not providing you with some sort of numbers like this or tracking these numbers, then maybe you want to ask them for some data on return on investment. And we provide this on a monthly basis because it's so important to track your stuff. And we don't want to just be another liability. We want to be an asset that's helping you grow your business. And so that's the two ways that you can look at it is what are the leads? How many leads did my business get this month? And you can do that by tracking all of your leads in some type of spreadsheet like this. And. And then you want to look at your actual closed business. Where did my actual closed business come from? So we looked at creating visibility. There's a bunch of different channels you can get calls from and leads. And then ultimately you want to track your sales, so your conversions. All right, so if you like this video, be sure to hit that like and subscribe. We post content about growing local service businesses and we will see you in the next video.