Good lead generation means getting consistent results, but great lead generation means getting consistent results while being efficient with marketing resources.
Making thousands or millions in revenue might sound great, but it won’t make sense if you spent the same amount to bring it in.
In this guide, we take a look at how we can calculate outbound and inbound lead generation ROI depending on the channels that you’re using so that you can assess if you’re being efficient with your marketing.
Let’s dive right in.
Terms You Need to Be Familiar With
Before we get into computations, it’ll help if we familiarize ourselves with a couple of terms.
The most basic is TMC or Total Marketing Costs, this is applicable in any channel and refers to the total amount of money spent on marketing for a specific campaign. (You can also use it for a group of campaigns if you want to)
This is the most general term that you can use to group all your expenses.
TR or Total Revenue generated, can be represented in different letters or in different terms. For the sake of simplicity, we will just refer to it as TR. This is all the revenue you generate in a campaign or group of campaigns.
For other computations you can look at L or Leads is the number of leads generated from a campaign. They don’t have to convert just yet. You can break this down in SQLs and MQLs, or adjust the lead quality depending on your internal parameters.
The Easiest Way to Compute Return on Investment (ROI) and Cost Per Lead (CPL)
The simplest way to compute any ROI is to take the total revenue generated and subtract the costs involved in marketing, take the answer and divide it by the costs, and then multiply it by 100.
For example, say you spent $1,000 generating $5,000 in revenue on a social media campaign.
5,000 – 1000 = 4000 4000/1000 = 4 4 * 100 = 400% = ROI
This is the easiest way to compute any ROI, but it doesn’t paint an overall picture and is too simplistic to be used for efficiency computations.
Computing for CPL (Cost Per Lead) is fairly easy as well. Just divide TMC by L.
However, just like ROI, it doesn’t show you everything.
The problem with a basic ROI computation is that it doesn’t show you the time factor.
This means that with slower campaigns, you could be facing a lower ROI compared to campaigns that have been ongoing for longer periods of time.
Releasing new campaigns also becomes trickier since you lower beginning ROIs could be deceiving to marketers.
Also, it doesn’t show you the ROI when it comes to new clients being onboarded.
You could have 30 clients coming in with a really high LTV but with small initial purchases compared to only 2 clients with lower LTVs but high initial purchases skewing your ROI data. You need to take into account how many leads are coming in as well.
Computing Email Marketing ROI
First you want to start with how much revenue was made from the campaign and minus all your marketing spend.
- Writing the emails
- Specialized software subscriptions
- List building
- Verification services
Once you get the answer, divide that with marketing spend.
Now just like the example in the beginning, multiple the number by 100 to get the percentage.
(Revenue – Cost) / Cost = ROI
Computing Facebook Advertising ROI
For social media or digital advertising, the term Return on Ad Spend (ROAS) is used instead of ROI.
To compute it on Facebook, you need to set up Facebook Pixel for your website. Purchase Value has to be tracked in order for this to work.
Once you’re done you need a custom reporting column on Facebook. Choose to show only the main metrics that you need.
Go to the “Conversions section”, and click on “Standard events”. You’ll find an option to include “Purchase ROAS (return on ad spend)”. Click on the tick box.
Add your time frame and you should be good to go.
By default, it should show you both 1-day and 28-day views.
Computing Google Ads ROI
The return on investment for Google Ads is highly contingent on what your ads do. You can track conversions, CTR, imports, local actions, installs, etc.
They’ll provide you with a tracker in your Google Ad manager interface, and all you have to do is take your total ad spend and divide it by the number of actions a user took.
However, if you’re looking at total revenue, you need to follow the same computations we’ve shown you above.
Computing outbound lead generation ROI is an essential part of ensuring if marketing dollars are being utilized well. By tracking ROI, organizations can be more flexible to changing needs and adapt accordingly.
However, computing ROI does have its limitations, so make sure to use it with other calculations as well.