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Why ROI is important

When you spend £1 on marketing or Public Relations (PR), how much should you expect in return?

When someone asks you, “is your marketing or PR working,” what do you think they’re really asking? Are they asking if it’s generating awareness, generating traffic to your website, or generating sales?

When we ask this question, we want to know if your marketing or PR is effectively generating business in a profitable way. That’s really what effective marketing and PR is trying to accomplish, and here at Plinkfizz its important to us that we’re working with you to make you successful at what you do.

Anyone responsible for spending money to generate revenue (e.g. marketers and PR specialists) should have a simple way to know if their activity is generating business. This is why return-on-investment (ROI) is such an important metric for any business activity.

ROI is calculated using two figures: the cost to do something, and the outcomes generated as a result (typically measured in profit).

There are however a few challenges with calculating ROI for marketing and PR activities.

Marketing and PR activities need considered planning time, key KPI’s need to be put into place, before starting the activity and planned outcomes must be decided. You also need to consider that some of these activities may take some time to start generating ROI, don’t forget that short term wins aren’t always the most productive, they could also cost you more in the long term, another key reason for measuring your ROI.

So where do I Start?

PR – You may have previously used or heard PR professionals use the measurement of AVE. AVE attributes an ad value to earned media content secured by a PR practitioner.

An arbitrary multiplier is often applied, justified on the basis that editorial content has greater credibility and is valued more by consumers than ad space.

It’s an entirely flawed approach and is completely out of date as it cannot be attributed to digital PR channels.

In addition, it has been denounced by the Chartered Institute of Public Relations (CIPR), Institute for Public Relations (IPR), Public Relations Communications Association (PRCA) and Public Relations Society of America (PRSA), and others.

 

AVEs have no relationship to a campaign’s objectives, messages, or sentiment, let alone organisational outcomes but that doesn’t stop them continuing to be used as a public relations metric. At Plinkfizz we’ve developed a completely transparent integrated approach to demonstrate ROI which uses the latest industry PR standards.

Marketing – The revenue to marketing cost ratio represents how much money is generated for every pound spent in marketing. For example, five pounds in sales for every one pound spent in marketing factors at a 5:1 ratio of revenue to cost.

A good marketing ROI is 5:1.

Your target ratio is largely dependent on your cost structure and will vary depending on your industry.

What is Counted as a Marketing Cost?

When calculating your ratio, a marketing cost is any incremental cost incurred to execute that campaign (i.e. the variable costs). This includes:

  • pay-per-click spend
  • display ad clicks
  • media spend
  • content production costs
  • outside marketing and advertising agency fees

Note: It must also be noted that poor artwork design can impact on your marketing and PR activity, so a fully integrated approach is key to ensuring your maximum ROI.

 

So how can we help?

As a multi award winning integrated agency we have to demonstrate a sound ROI to all our award entries. We have also developed our own suite of measurement tools that enable us to measure all your on and off-line marketing and PR activities.

Our approach

As part of working with our customers we initially agree our joint KPI’s we then measure and share these, enabling us to have a complete transparent approach to our services.

So how do I find out more?

Drop us a line and we’ll arrange for one of team to take you through the process, we’ll only change what needs to be changed and we won’t offer you something that you don’t need.

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