How do you measure ROI?

Marketing ROI

Return on investment (ROI) begins with understanding the value of a customer. First, determine the following averages: customer order, annual customer volume, gross profit and length of a customer engagement in years.

ROI is determined by taking the average annual gross profit per customer multiplied by the average years of customer engagement. That number is the average customer’s lifetime value to your organization. For example, $1,000 in annual profit multiplied by 10 years equals $10,000.

If your goal is to acquire 50 new customers in a year, and you have a budget of $25,000 to do so, the acquisition cost per customer is $500. In this scenario, you would obtain a return on investment when you acquired your 25th new customer. However, the value of that investment of $25,000 to acquire those 25 customers should yield the company $225,000 over the 10 year customer engagement.

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