The missing investment ingredients in marketing ROI

Slackershot - Spare Change

Do your marketing ROI calculations sync up with the reality of your company’s bottom line? Or have you put together an ROI calculation and found your net revenue projections falling short? Chances are, you’re missing some key ingredients in the calculation of ROI, especially on the I part, investment.

Recall that ROI is a simple math equation: (Earned – Spent) / Spent. Your revenue is offset by your investment.

What do you spend money on that fuels your marketing? For most marketers, we think of only campaign spends, like ad budgets or the price of a marketing agency. However, if you wanted to build a complete, thorough picture of ROI, you’ll need to detail three kinds of money: system, hard, and soft.

Let’s look at these three kinds of money through the lens of a Google AdWords campaign.

Hard Dollars

Hard dollars are actual money paid out. If you run an AdWords campaign, hard dollars would be the money you pay to Google to make the ads appear. This is the most common ingredient in ROI calculations.

Soft Dollars

How long did it take you to write your AdWords ads? How long did it take your creative team to put together some display images? How long did it take you to load the ads into the system and hit go?

Time is the greatest source of soft dollars. You account for it by what your effective hourly rate is, and add that to investment. For example, suppose your salary is $50,000 per year. Your hourly equivalent rate is $24.04 per hour. Thus, every hour you spend on AdWords adds an additional $24.04 to the cost of your campaigns.

System Dollars

You don’t just imagine an AdWords ad and it appears. You created that ad on a computer, using electricity, with an Internet connection, possibly at a desk inside a building that you pay rent on. If you work at a company, all the benefits like insurance, office perks, etc. add up to your total cost as an employee. If you’re self-employed, the money you spend on yourself in a work context adds up to your business expenses.

Those system dollars create the environment needed for you to do your work. What do they cost? The easiest way to calculate system dollars is to simply divide the operating expenses of employees (less salary and cash benefits) by the number of employees at a business level, and then add that to the effective hourly rate.

For example, if your business spends $10,000 a year in system dollars to maintain the desk, computer, etc. and your salary costs the business $50,000 per year, that puts your effective cost at $60,000 per year, or $28.85 per hour. Every hour you spend on AdWords should add $28.85 into the campaign cost.

Add The Dollars Up

While this one example may seem like overkill to compute the ROI of an AdWords campaign, you must apply this methodology to all your marketing ROI calculations. Once you’ve accounted for hard and soft dollars, ensure that you’ve accounted for system dollars and you’ll have much more accurate ROI calculations.


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How to track offsite conversions with Google Analytics

Michael Mindes of Tasty Minstrel Games asked:

Tasty_Minstrel_Games_on_Twitter____cspenn_I_heard_you_on_Social_Media_Examiner_podcast__Is_there_a_good_way_to_track_Amazon_Affiliate_results_with_Google_Analytics__.jpg

This is a terrific question and not necessarily as complicated as you might think. It requires some logic and inference.

First, begin with understanding what the goal is. On Amazon, the goal is sales. We want to sell as many of our products as possible. If you’re in Amazon Associates, then your goal is selling other peoples’ stuff. If you’re in KDP or Webstores, it’s selling your own products. For example, all of my books are sold both on my website and on Amazon.

Once you know what the overall sales goal is, you have to get your sales data from Amazon. Let’s use Marketing White Belt as an example. In the last 90 days, I’ve sold approximately $60 of Marketing White Belt on Amazon. So far, so good. I know what my traffic to Amazon is worth.

The next question is, how much traffic have I sent to Amazon? Using Google Analytics event tracking, I can track how many times people click on my Marketing White Belt book ads on my website:

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89 clicks. Thus, I can make the starting inference that my value per click is $60/89, or 67 cents per click on my Marketing White Belt ads. Thus, I can set a goal value in my Google Analytics admin that any time I get an outbound click on my Marketing White Belt book, call it 67 cents of revenue.

Obviously, this isn’t exact. People can buy the book from Amazon without ever having been to my site. Thus, it’s important to rebalance. I’d run this analysis every 30 days and recompute the value of a click from my website to Amazon. Over time, I’d get enough data to create a reasonable average, and then use a rolling average to settle in on a value per click.

To Michael’s question, what about Amazon affiliates, where you’re sending clicks to other people’s stuff? Again, the same general logic applies. You know how much money you earn from Amazon each month, from the Associates reports. You should know, using Google Analytics, how many clicks you’re sending to Amazon. Work out what a value per click is, and you’ve got the beginnings of decent estimation.

Get as granular as you can, too. If you’re an Associate focusing on several different verticals, consider setting up event tracking categories. You might have one tracking event for electronics, another for books, etc. and then from your Associates reports, break out the fees you earned in each category. Now you can set up goal conversions per category.

Good luck tracking! Be sure to read up on Google Analytics Event Tracking.


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The long tail is longer than you think

I left the world of financial aid and student loans way back in January 2010.

Slackershot: Financial Aid Podcast Shirt

I had created a ton of content for the company I was working for at the time, including the very first financial aid podcast, and I’m proud that kids paid less for college based on the work I did.

But this should give you a sense of just how long the long tail of content is. I got this email today – October 23, 2014, almost 5 years after leaving the field:

Quick question could you recommend where my daughter should go/apply for a student loan? I remember you were connected with a student loan site or was I tripping?

This demonstrates the power and longevity of content online. Half a decade has passed since it was my job to answer questions like this, yet people still find me through evergreen content and ask questions. (I’m still happy to answer as best as I can, because it’s for a good cause)

The content you create today can come back to you years later. As long as content marketing programs take to get running, once they have momentum, they can continue paying benefits to you long into the future.

Financial aid stuff

For those interested, by the way, the answer to the above question is as follows. Before you go shopping for loans, be sure you’ve applied for scholarships. There are millions of dollars out there and many scholarships only get a handful of applicants, especially the low dollar ones. Winning 10 $500 scholarships is just as good as winning 1 $5,000 scholarship, and the competition is lighter. Googling for scholarships is simple to do, and just requires dedication and work.

One parent who was a listener of my podcast back in the day had a great tip: he paid his child 10 cents on the dollar for every scholarship they brought home. When Junior wanted a new car, new phone, new etc., this dad reminded him of the deal. By the time freshman year rolled around, the kid had the new phone, new laptop, etc. – because they brought home $138,000 in scholarships.

When it comes to loans, start by completing a FAFSA and then seeing what financial aid you qualify for. Every student enrolled in an eligible, accredited school can get an unsubsidized Stafford federal student loan. Students who file a FAFSA and are given approval by demonstrating financial need can get subsidized Stafford federal student loans as well. After that, students can either apply with a cosigner for private student loans, or parents can apply for federal PLUS loans. For complete information about federal student loans, go visit the US Department of Education’s website.

Your best bet before you begin the financial aid process is to talk to a qualified financial planner to look at all of your options. Many community banks and credit unions offer these services for free to members; typically they work on salary and receive no commissions or incentives to sell you extra stuff. Sometimes, taking out a home equity loan if possible may make greater overall financial sense than taking out a student or parent loan – but you can make that determination only when you look at the big picture, financially.


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