When you think about performance marketing, you probably imagine a well-oiled sales machine with the perfect CRM and lead generation system that never fails to deliver new customers. The reality, however, is that most performance marketing campaigns fail to deliver significant ROI. In fact, only about 20% of marketing programs result in incremental revenue.The reason for this is that most marketers don't actually know how well their performance marketing campaigns are working. They have no idea how many leads are generated or how many new customers have been acquired. The only way they can get an accurate read on their performance marketing ROI is to track each campaign in detail and measure each stage of the sales journey in order to understand where the bottlenecks are slowing down their efforts.There are two primary ways that marketers can measure the success of their performance marketing efforts: ROI and lead generation rate. Let's take a closer look at each one in more detail so you can make an informed decision when it comes time to launch your next performance marketing campaign.
The ROI of any marketing campaign refers to the ratio of the campaign’s net profit to its total marketing investment. The more profitable a marketing campaign is, the more profitable the entire company will be. The ROI of a marketing campaign is calculated by dividing the campaign’s profit by its total marketing budget.If your company spends $100,000 on marketing but earns $25,000 in profit, your ROI would be 25,000 divided by $100,000, or 25%. A campaign with a 25% ROI is considered very profitable.A company that achieves a 50% ROI is twice as successful. It would take twice as many marketing dollars to get the same return. A campaign with a 100% ROI is extremely profitable. It would take the same amount of marketing dollars to get the same return.
The lead generation rate of a performance marketing campaign refers to the number of leads generated per dollar spent on the campaign. This ratio helps you determine how much marketing money you need to generate a certain number of leads. For example, a lead generation rate of 10 leads per $100 would mean you can generate 10 leads for every $100 you spend on the campaign. If your campaign only generates 5 leads for every $100 spent, the lead generation rate is 5.This ratio is calculated by dividing the number of leads generated by the campaign’s total marketing spend. If you spend $10,000 on a performance marketing campaign and generate 10 leads, your lead generation rate would be 10 leads per $10,000, or 10/10,000, or 0.1%.A lead generation rate of 100 leads per $100 would mean you can generate 100 leads for every $100 you spend on the campaign. A lead generation rate of 50 leads per $100 would mean you can generate 50 leads for every $100 you spend on the campaign.
The best way to measure the success of your performance marketing campaign is to track each stage of the sales journey as closely as possible. You need to know how many leads are being generated and how many leads are becoming customers before you can accurately calculate your campaign’s ROI. It’s also important to remember that the best performance marketing campaign isn’t necessarily the one with the highest ROI. The campaign that generates the most leads at the lowest cost per lead is usually the most effective.