And at the end of the day, you want to know whether your marketing costs are actually growing your client base and driving business growth.
And that’s where measuring your ROI for marketing becomes crucial. We will walk you through how to calculate your SaaS marketing ROI in this post, along with key metrics to track and strategies to improve it.
There is one more way to help you calculate and get the right SaaS Marketing ROI. Hire a SaaS digital marketing agency and they will assist with your marketing at every step.
What is SaaS Marketing ROI?
SaaS marketing ROI finally translates to the amount one generates through the money expended on marketing. It shall tell you whether your strategy is the right one by giving back a good amount on that investment at the least. Even though one may have a small resultant negativity, it will tell it is perhaps time for alteration. A healthy ROI can only mean that your strategy is well working.
Calculating ROI is pretty straightforward. Here’s the formula you’ll use:
ROI = [(Profit attributable to marketing – Marketing costs) ÷ Marketing costs] x 100
How to Calculate SaaS Marketing ROI
1. Determine a Time Frame
This means selecting a time frame you are going to analyze. In line with your marketing plans and corporate goals, it could be monthly, quarterly, or even annual basis. Ensure you obtain all information you need in a chosen time frame.
2. Calculate Profit Attributable to Marketing
You will also be interested in knowing the amount of profit generated due to marketing efforts, hence consider the retained customers as well as new customers obtained.
For instance, let’s consider that your marketing efforts push up retention from 50% to 55% for your SaaS product with 10,000 users. This means that you have retained 500 more clients. Multiply this number of clients retained by the average revenue per user in your case to find the profit it represents.
Illustrative Calculation:
ARPU: $100
Additional customers retained: 500
Profit that accrues due to marketing: 500 x $100 = $50,000
3. Cost of Marketing
All that falls under:
- PPC advertising
- Content creation; for instance, writing and videos
- Social media marketing
- Email marketing
- Software-based marketing subscriptions
- Agencies’ fees
- Salaria for your marketing employees.
4. Calculate using the ROI Formula
Now that you have your profit and expenses, you can go ahead and input these numbers to the ROI formula.
How to Calculate ROI Formula: Example
Profit as generated by marketing: $50,000
Marketing expense: $20,000
ROI = [($50,000 – $20,000) ÷ $20,000] x 100 = 150%
That would mean every dollar you put into your marketing is made back into $1.50 by way of profits. Cool, right?
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Key Metrics to Track
While your ROI calculation can be pivotal, you’d also be wise to stay on the lookout for the following as key metrics so that you understand your marketing game better and how you perform:
- Customer Acquisition Cost
- Customer Lifetime Value
- Churn Rate
- Qualified Leads
Now that you have calculated your ROI, the next thing to do is to find ways on how to make it better. Here are some tried-and-true methods:
Improving SaaS Marketing ROI
After calculating your ROI, the next thing to do is to find ways on how to make it better. Here are some tried-and-true strategies:
1. Marketing Channel Optimization
Study closely the performance of different marketing channels. Focus on those areas that bring the highest number of leads and conversions. If a channel performs poorly, try to shift your funds into even more successful tactics.
2. Invest in Content Marketing
One of the great techniques to attract more new customers and establish your company’s credibility in its domain is offering premium-quality content. Invest in SEO by increasing organic traffic on your website and boost its presence online. Good-quality content can lead to high conversions and, over time, a better return on investment.
3. Freemium Models
Conversion rates can be highly improved by offering free trials or freemium business models to attract customers to try your goods. Users are more likely to switch to a paid plan once they experience the value of your offering.
4. Get Customer Feedback
Never underestimate the power of consumer feedback! Ask for regular input from your customers to find out what they want and what they are frustrated about. Use this knowledge to make improvements in marketing and product development. Satisfied customers are more likely to refer you to their friends and acquaintances, and this will increase your return on investment and reduce your cost per acquisition.
5. Track and Tweak Your Strategies
Monitor the marketing performance and be prepared to revise your strategy based on findings. A/B testing could therefore help you improve your marketing effectiveness by establishing exactly what works for your market.
Conclusion
The better you understand how well your marketing efforts are working, the more you can leverage your investment. Calculating SaaS marketing ROI requires knowledge of how to do so. By following the procedures illustrated in this guide, you can measure accurately the return on investment and take appropriate decisions to improve your marketing strategy.
Remember that a good ROI does not only mean creating profits but also adding value to your clients and the connection that will last longer. With acquisition, retention, and continuous improvement on the customers, you’ll definitely grow and thrive with your SaaS business for long.
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