Using CRM Technology to Improve the ROI of Your Marketing Efforts
concept of Return on Investment (ROI) is one that you’re likely
familiar with. That being said, how many of you actually take the time
to calculate the ROI of your marketing efforts? If you’re not using CRM
technology to plan, execute and track your marketing campaigns,
calculating a return on your marketing expense can be an extremely
difficult task to say the least. In this article, I’ll provide a
definition of ROI and show how you can use a CRM application to help you
make better and more informed decisions about how to spend your
ROI – What is it and How Do We Calculate It?
start by explaining the concept of return on investment. Essentially,
ROI is a measure of the benefit that’s derived from an expenditure or
investment. When calculating ROI, the results are typically expressed
as a percentage although you may also see results expressed in other
ways. For example, when evaluating whether or not to make an investment,
ROI may be expressed in terms of “Payback” (i.e. how long it will take
to recoup the initial investment) or it might simply be expressed in
monetary terms as a dollar amount.
To calculate ROI, you need to know two key pieces of information:
If you have these two pieces of information, you have everything you need to calculate ROI as follows:
- The amount of the initial investment
- The amount of the gain resulting from making the initial investment
(Yield from investment – Cost of the initial investment) / Cost of the initial investment = ROI
can illustrate this in practical terms by using the following example.
Let’s assume we conducted a small marketing campaign that cost $1,000.
After tracking and analyzing the results of the campaign, we calculated
that it led to sales of $1,400. In this case, the ROI of the campaign
would be 40% calculated in the following way:
Amount of initial investment = $1,000
Yield from the investment = $1,400
ROI = ($1,400 - $1,000) / $1,000 = 40%
Why Should You Calculate ROI?
seen that ROI is a relatively straightforward concept, you may still be
asking the question, why do I need to calculate it in the first place?
Well, if your practice has an unlimited marketing budget and money is no
object, you might not want to or indeed, even need to. Realistically
though, it’s unlikely that you have an unlimited amount to spend on
marketing so you need to calculate ROI in order to allocate your
marketing dollars and spend your budget on the strategies that yield the
To show an example of why calculating ROI is
important, let’s assume that your practice typically engages in the
following types of marketing efforts:
also assume it’s the start of the year and you’re assessing where to
spend your marketing dollars in the next 12 months. You’ve done your
research and determined that the total cost of conducting each of these
campaigns is as follows:
- Direct mail (i.e. letters and postcards mailed to prospects)
- Email marketing
- Dinner seminars
- Newspaper advertisements
- Paid online advertising (i.e. Google Adwords)
- Radio advertisements
|Paid Online Marketing||$2,500|
cost to execute all of these campaigns is more than $50,000. However,
you only have $25,000 budgeted for marketing this year. Which of the
campaigns should you execute and which of them should you pass on?
this is all the information you have, it’s next to impossible to make a
decision. Without knowing the potential return of these campaigns, any
decision you make is essentially a shot in the dark. However, if you had
tracked these types of campaigns in past years, you would have data
that you could use to help you make a more educated assessment. Let’s
assume you had conducted these types of campaigns in the previous 12
months and for simplicity, assume that the costs of the campaigns hadn’t
changed. Looking at the results, you are now able to calculate ROI and
make a more accurate assessment of where to spend your marketing
|Marketing Strategy||Cost||Revenue from Campaign||ROI|
|Paid Online Marketing||$2,500||$2,500||0.0%|
this example, we can see that the strategies yielding the highest ROI
were direct mail followed by dinner seminars with ROI of 60% and 20%
respectively. We can also see that two of our campaigns yielded a
negative return while one yielded no return and one a 5% return. Having
access to this data has given us a means to assess our marketing
effectiveness and could lead us to determine that we should spend the
bulk of our marketing dollars on direct mail and dinner seminars and
would likely want to cease any email marketing and radio advertising.
this time, it’s important to note that this conclusion is based solely
on the revenue derived from the campaign and doesn’t take into
consideration the positive impact your radio advertising and email
marketing might have had in creating brand awareness - A person may have
received your direct mail piece and not responded but subsequently,
they heard your radio advertisement which reminded them of the direct
mail piece they had received and then decided to follow up with you.
This brings up an important point – all marketing doesn’t have to have a
positive ROI – you may want to conduct some campaigns to help you build
your brand in your local marketplace which will help improve the ROI of
all of your campaigns in the future.
Using a CRM Application to Collect ROI Data
As mentioned previously, if you’re not currently using some
type of CRM application to plan, track and analyze your marketing campaigns,
it’s next to impossible to calculate the ROI of your various campaigns. In
earlier articles, I used InsurPro from Lodestar Technology Labs (www.startercrm.com/insurance-pro.aspx)
as an example of a CRM application designed specifically for insurance and financial
professionals. If you were to use a CRM
system like InsurPro, your practice would have the necessary tools to more
effectively assess how well your marketing campaigns were performing. Let’s
take a moment to look at how InsurPro helps you do this.
InsurPro has a “Marketing Programs” tab on the main
dashboard. Clicking on this tab opens up the marketing programs dashboard where
you have the opportunity to create new marketing campaigns or update existing
campaigns. When you choose to create a new campaign, a dialog box opens that
provides access to data fields that allows you to enter information about your
campaign. This information includes:
with this, you can enter information about the tasks necessary to
complete the campaign, assign responsibility for the tasks related to
the campaign and make additional notes about the campaign.
- The campaign owner
- The status of the campaign
- The type of campaign (email, direct mail, etc.)
- A description of the campaign
- The total audience for the campaign
- The expected (estimated) response
- The actual response
- The budgeted cost
- The actual cost
- The expected revenue
- The actual revenue
campaign is completed, InsurPro provides reporting functionality that
allows you to generate reports containing campaign summary data – i.e.
the total cost and revenue generated from a campaign. Using this data,
calculating the ROI of your campaigns is a simple task.
Tracking Campaign Response
One important consideration when discussing ROI relates to
the tracking of your campaign’s response. Unless you include a response
tracking mechanism in each campaign, measuring response is extremely difficult,
if not impossible. Examples of campaign response tracking tools include:
addition to including a response tracking mechanism in your ads, it’s
also critical that when you do receive a response, you record that
response in your CRM application. Again, InsurPro provides this
capability by including a “Source” field in the Contacts record where
you record how that contact was referred to you.
- A unique phone number to call – Good for direct mail, print ads and radio ads
- A unique landing page on your website – Good for paid search and email campaigns
- A limited time offer – Good for direct mail, print ads and radio ads
conclusion, tracking campaign ROI is essential to the financial
well-being of your practice. Use a CRM application and it’s easy to do.
Failure to track campaign cost and response could lead you to make
disastrous mistakes in how you allocate and spend your marketing budget.
Calculate ROI and you’ll start to make better decisions that can help
you manage and grow your practice.