Sparkinator Marketing Blog

How to Use a Basic B2B ROI Formula

Posted by Zach Chapman on Dec 28, 2017 3:11:22 PM
Zach Chapman

Companies want to know more than ever if what they're putting their time, money, and effort into is worth it. Not only that, they want to know if their resources are being put the the very best use. People deserve to know this information but it isn't always so easy to calculate B2B ROI for marketing.

b2b roi

 

Basic MROI calculator:

(Sales Growth- Cost of Marketing) / Marketing Cost = ROI

 

Example: 

Sales grew by $100,000 and the cost of marketing was $25,000 your marketing ROI would be 300%

This is a fun and easy ROI formula that glosses over a lot of important details. This doesn't take into account that your sales people could be putting in overtime, your product got better, or any number of factors that may have influenced the sales growth. 

 

Marketing Campaign Specific ROI

To really see the effect marketing has had on sales we recommend excluding the average growth over a worthy period of time. So if sales consistently grow 8% year over year and then you start a marketing campaign your calculation should exclude the 10% growth. This will help keep variables consistent and give a more accurate measure of what the marketing efforts contributed. 

(Sales Growth - Marketing Cost) / Marketing Cost - Average Organic Sales Growth = ROI

Example:

Sales grew by $200,000 and the cost of marketing was $50,000 and also your average sales growth was 10% prior to the marketing campaign. The marketing ROI is 290%

 

Things to Consider

Now this formula is decent but it still doesn't give you the entire picture. One thing we it doesn't take into affect is that marketing is a long-term, multiple touch process that leads to sales growth over time. You wont see immediate results for all of marketing. Especially up front there is quite a bit of lag time before a b2b marketing campaign kicks in and starts seeing any results. We tell our clients to not expect results until sometime between 3-6 months. 

Remember the goal is to maximize profit and MROI. The difference is similar to the difference between being efficient (obtaining high MROI) and being effective (driving maximum profit and long-term value). Maximizing profit isn’t a simple matter of shifting marketing investments from low- to high-ROI activities. 

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Tags: b2b roi, Marketing Metrics CEO's Actually Care About

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