When it comes to evaluating marketing vendors, one of the most critical factors that companies consider is potential ROI (Return on Investment). However, calculating potential ROI can be a complex and challenging task, especially when dealing with various marketing channels and vendors. In this blog post, we will discuss how companies can calculate potential ROI when evaluating marketing vendors.
Define Your Marketing Goals
Before you start evaluating marketing vendors, it’s essential to have a clear understanding of your marketing goals. Ask yourself, what do you want to achieve through your marketing efforts? Are you looking to increase sales, generate leads, increase brand awareness, or drive website traffic? Once you have identified your marketing goals, you can move on to the next step.
Identify Potential Vendors
The next step is to identify potential marketing vendors that can help you achieve your marketing goals. You can do this by researching online, asking for referrals from colleagues or industry peers, or attending marketing events. Once you have a list of potential vendors, you can start evaluating them based on their services, expertise, and pricing.
Analyze Cost vs. Benefit
The cost vs. benefit analysis is a crucial step in calculating potential ROI. You need to determine how much you are willing to spend on marketing, and how much you expect to get in return. Some marketing vendors may charge higher fees but can deliver better results. On the other hand, some vendors may charge lower fees but may not provide the same level of expertise and quality of service. Therefore, it’s essential to weigh the cost against the benefits of each vendor before making a decision.
Consider the Marketing Channels
Different marketing channels have different ROI potential. For instance, email outreach and LinkedIn marketing have proven to be highly effective in generating leads and sales. At the same time, outbound calling and retargeting ads can help increase conversion rates. A sales chatbot can automate your sales process and improve customer engagement. Therefore, it’s essential to consider the marketing channels that each vendor specializes in and evaluate their potential ROI based on your marketing goals.
Measure the Potential ROI
To accurately calculate potential ROI, companies need to consider several factors, including the average deal size, sales cycle, and how to measure and compare it against the price of a service.
For example, let’s say a marketing vendor charges $3,000 per month for their services. If your average deal size is $4,000 with a two-month sales cycle, and you closed just two deals after a two-month period, you would generate $8,000 in revenue. If you subtract the $6,000 paid to the marketing vendor during that period, you would be net positive $2,000. This translates to a potential ROI of 33.3% on your investment.If you have an MRR-based business, you will want to consider the average lifetime value (LTV) of a customer as the average deal size.
Here is a simple formula you can use to determine your potential ROI:
Potential ROI = (Estimated revenue generated – Cost of vendor’s service) / Cost of vendor’s service x 100%
In conclusion, calculating potential ROI when evaluating marketing vendors requires careful consideration of various factors. By defining your marketing goals, identifying potential vendors, analyzing cost vs. benefit, considering the marketing channels, and measuring the results, you can make an informed decision and choose a vendor that can deliver the best ROI for your business.