Marketing ROI measures the revenue or value generated from marketing activities relative to the cost invested in them. It matters because it helps your business assess whether your marketing strategies are profitable, ensuring that resources are allocated efficiently and contributing to business growth.

(Revenue from Marketing - Marketing Costs) / Marketing Costs

This formula helps determine how much profit was made for every dollar spent. However, depending on the type of marketing effort (brand awareness, lead generation, project pursuit), the formula can be adapted to measure different outcomes, like leads or customer lifetime value.

A good marketing ROI varies by industry, but a common benchmark is a 5:1 ratio, meaning $5 in revenue for every $1 spent on marketing. However, for some high-margin businesses, a 10:1 ratio is achievable, while others may be comfortable with a 3:1 ratio, especially in competitive markets. The AEC industry is more along the 3:1 ratio.

The timeline to see marketing ROI depends on the type of campaign or initiative. For example, pay-per-click (PPC) campaigns can show immediate results, while SEO or content marketing may take 6-12 months to yield significant returns. Expanding the company into a new market can take 1-3 years to recognize a positive ROI. It’s important to set expectations based on the strategy used.

Improving ROI involves targeting the right audience, optimizing marketing channels, refining messaging, and reducing inefficiencies in processes. Regularly reviewing data (I recommend an audit every 6 months), experimenting with different approaches, and focusing on strategies that provide the highest return can lead to better ROI.

For indirect results (e.g., brand awareness, customer engagement), focus on measuring proxy metrics like increased traffic, social media engagement, or project pursuit quality. You can also create a multi-touch attribution model to assign value to touchpoints across the customer journey.

Budget allocation should be based on past performance data and the potential ROI of different channels. Prioritize channels that have historically provided the best returns but also allow room for testing new strategies or emerging platforms that could bring high growth. Track the performance of each segment of the budget closely to adjust as needed.