There’s no arguing the effectiveness of content marketing in terms of return on investment and overall long-term gain. While we all know it works, there are very few of us who can actually prove it in terms of an actual dollar figure. Using key performance indicators (KPIs) is a great way to measure overall performance in the sense of new website traffic, social media shares, and newsletter signups, but how do we turn KPIs into figures our accountant can use?
It’s actually quite simple.
Step 1: Record Your Total Investment
This shouldn’t need much explanation. Production cost (including writers, editing time, brainstorming sessions, etc.), outreach, stock photos, design, ad spend (if paying to promote), and back and forth emails with the writer, editor, or publisher should all be figured (using an hourly rate if necessary). You need a comprehensive estimate for how much a piece actually cost you.
Rarely is this as simple as noting that you paid the writer $150. Don’t overlook anything or your results are going to be skewed.
For later use, we’re going to assume that our content breakdown looks like this.
- Writer: $100
- Editor: $15
- Stock photo: $10
- Email correspondence: $12.50
- Sponsored post fee with publisher: $225
That leaves us with a total of $362.50 for this single piece of content.
Step 2: Calculate Your Return
Suppose you average 10-percent growth before any effort on your part, with approximately 100 sales per month at an average of $50 per sale. You know that your content marketing efforts are paying off as you see an average monthly increase of 15-percent over your existing month-over-month growth, giving you a total of 25-percent month-over-month growth (10-percent organic, 15-percent additional due to content).
To figure your return on investment, you must first know what sort of increase you’re seeing from content. To do so, you’ll have to isolate traffic using your multi-channel reports in Google Analytics in order to give you a clear picture of traffic that is coming from referral and organic sources as opposed to paid traffic. Of course, if content marketing is all you’re doing, you can skip this step entirely and figure the numbers based on growth.
In this case, a 25-percent increase looks like this (figured with 100 existing sales per month baseline) .
100 Baseline sales +10 Organic +15 Content
So, in a 30-day period, you’ve achieved 15 additional sales, all from your content marketing efforts. If we figure $50 per sale, it looks like this.
$5,000 +$500 Organic +$750 Content
Here is where most people mess up. To figure your total ROI, you aren’t counting organic growth. You would have had that anyway (based on averages). What we’re interested in is the additional $750 in sales based on your increased content marketing effort.
Step 3: Do the Math
From step one, we know that production cost for that single piece of content cost us $362.50. From step two, we know that we made an additional $750 due to that piece of content.
So now, we just do some simple math. The formula looks like this,
ROI = ((Earnings) – Content Investment / Content Investment) x 100 – or – ROI = (($750) – $362.50 / $362.50) x 100
If you did the math, you’ll see that works out to an ROI of 106.9-percent.
All marketing ROI calculations start with these three steps, and this simple formula. From there, they can be infinitely more complex depending on what you’re tracking, how many channels you need to segregate, and how complex your actual funnel is.
But for now, this should definitely get you started.