How to Calculate ROI For Your Programs
In both cases, now you have benchmarks. Now, the opportunity is to decrease the $ spent and increase the $ gained on the next program. And, math isn’t everything; there are secondary benefits, too. Like in our event example the goodwill generated toward your Club customers.
So, don’t focus on the leaves, look at the forest and you will always be ahead, and always improve.
What if you don’t have these numbers?
What if you’re not sure what your costs are? Just remember this:
Some call it a “Silly Wild-Ass Guess”.
When I presented them, I always thought of it as “I Speak, And you Will All Giggle.”
The point is – estimate it.
Saying you can’t calculate ROI because you can’t get it down to the final pennies is missing the point. What is important is that you’re aware, directionally, of what your costs and returns are.
For example, if you don’t know your COGs, assume if you sell DTC full-price you’re getting about 85% (average margin for full MSRP versus FOB, or trade, which is 50%). So, if you’re Wine Club is a 20% discount then your margin is still 65%. Then don’t worry about each order, just SWAG your formula for a Wine Club event to be:
ROI=SALES X 65% – PROGRAM COSTS / PROGRAM COSTS
If you SWAG your costs and keep track of your net sales after taxes and shipping, you should get a good directional analysis of how the program did.
And, if you have some poor-performing programs, good for you! It means you’re being creative. But at least you’re tracking them and learning from them.
“I never make stupid mistakes. Only very, very clever ones.”
~ John Peel
p.s If this sounds interesting but tedious, ROI analyses are relatively easy to outsource periodically to a consultant, you know, like me, for quarterly program reviews for you. Let’s talk.