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3 minute read
If you’ve worked your way through the steps of a good marketing strategy, you should find developing the resulting marketing plan a relatively simple task of pulling all the ends together.
That said, just because you’ve taken an evidence-based and data-led approach to define effective marketing tactics, doesn’t necessarily mean the plan itself will be guaranteed to hit your business objective and key results.
Other factors such as the budget, resource and capacity available may impact what you’re able to include in the plan, having a knock-on effect to the overall contribution your plan can make.
After all the hard work of developing a strong strategy, avoid your marketing plan falling short of expectations by using ROAS and ROI funnels.
The key is setting expectations of the budget required to achieve an outcome with all stakeholders and the perfect way of achieving this is by developing customised ROAS and ROI funnels.
They should allow you to input your marketing plan’s overall reach and using conversion estimations based on historical data, output an estimated revenue figure.
You can then compare the revenue output with the budget to ensure your marketing plan is at the very least balancing the budget with revenue, but even better producing more revenue than budget.
It is usually relatively easy to calculate Return on Ad Spend, however businesses will also be interested in Return on Investment, which should compare the estimated revenue output with the total cost to the business, including headcount costs and subscriptions to tools etc. This can get harder to get a positive return on depending on the company’s cost base.
Taking the time to build your own custom ROAS and ROI funnels will pay dividends.
Input your marketing budget (or a particular campaign or channel) at the top of your funnel and then work your way down through your businesses’ conversion steps until you get to revenue.
For instance, if you’re selling your product via your website, you may need to factor in a Click Through Rate from any ads first, followed by an onsite conversion rate and a completed order rate in order to estimate your revenue outcome.
If you’re selling a service via a sales team, your funnel would need to include your sales step conversion rates.
Then, think about how your customers pay, is there one fee, a monthly subscription, a range of products and costs? Depending on the answer you may need to use an average value per customer benchmark to estimate revenue per customer.
You may also wish to consider your average lifetime customer value in order to bake in your customer marketing initiatives.
Finally, to consider the cost to the business for operating as a whole, the finance team should be able to tell you this cost and assist with calculating a per customer value you can apply to your funnel to revise your revenue output.
You can then calculate your ROAS and ROI using the below formulas:
ROAS
Revenue / Plan Cost
Return on Investment
(Revenue - Cost) / Cost
Ensuring your marketing plan achieves a positive ROAS and at least a neutral ROI (even better, a positive one) will help demonstrate to stakeholders what the expected output should be relative to the budget available, setting realistic expectations.
With this information you can then also model different budgets for different levels of outcome to show what could be achieved with a larger budget, aiming to contribute more towards the company’s OKRs.
Being able to demonstrate your ROAS and ROI will not only build confidence in giving marketing the necessary budget, but it will also allow you to come back to the workings if the plan under or over performs. With your stakeholders, you’ll be able to compare actual performance with the assumptions used to build the funnels, find where the assumptions need updating, review how that impacts the ROAS and ROI outputs objectively, and make the necessary adjustments to get your plan back on track.
There’s much less stress, finger-pointing and spinning around involved, providing a more positive, solutions-focussed experience for everyone.
