Understanding Marketing Budget Categories for Effective ROI Tracking

In today's competitive business landscape, marketing plays a crucial role in driving sales and revenue. However, simply allocating a lump sum for marketing expenses is not enough.

To effectively track the return on ad spend (ROAS) and return on investment (ROI), it is essential to itemize marketing spend into various categories.

Here we explore the different categories of marketing spend and why itemizing them in a budget is crucial for understanding which areas are driving sales. 

Importance of Itemizing Marketing Spend

Tracking Return on Ad Spend (ROAS) and Return on Investment (ROI)

By itemizing marketing spend, businesses can better evaluate the effectiveness of their advertising efforts. Each category represents a specific marketing strategy or channel, and by tracking expenses and corresponding revenue, it becomes easier to calculate ROAS and ROI on a per-category basis. This granular analysis helps identify which areas are generating the highest returns and optimize marketing strategies accordingly.

Attributing Sales to Marketing Efforts

Understanding how customers discover your business is vital for effective marketing budget allocation. By incorporating methods such as asking customers HDYH "how did you hear about us?", creating online shopping codes, or specific landing pages on websites, attribution can be accurately tracked. This data allows businesses to assign sales to specific marketing channels or campaigns and optimize their efforts accordingly.

What are common marketing budget categories for effective ROI tracking?

Categories of Marketing Spend

1. Print

Print marketing encompasses expenses related to advertisements in newspapers, magazines, brochures, flyers, and other physical printed materials. It is essential to track this category separately to assess its impact on sales and determine its relevance in the digital age.

An effective way to track print spread is by making the printed ad a "bring in to the store to save deal" or feature a unique online shopping code in the ad, or feature a scannable QR code in the ad with a software like hovercode that allows you to track the number of scans of the QR code.

2. Merchandise

Merchandise expenses cover the production and distribution of promotional items such as branded merchandise, corporate gifts, and promotional giveaways. By itemizing this category, businesses can evaluate the effectiveness of these tangible marketing assets in terms of customer engagement and brand awareness.

An effective way to track the reach of your merchandise is to ask recipients of your merch to post on their social media account with a branded hashtag. An additional way to link merchandise marketing to revenue is to utilize in a FGWP (Free Gift With Purchase) promotion. 

3. Events

Event marketing involves organizing or participating in industry conferences, trade shows, exhibitions, festivals, local community events like car shows or pet adoptions, and other events to promote products or services. By tracking expenses related to events separately, businesses can assess their impact on lead generation, customer acquisition, and overall brand exposure.

An effective way to track ROI at an event is to state your KPIs (Key Performance Indicators) at the outset of the event. For example, if acquiring email or phone numbers to increase your text message or email marketing database as a goal, you can create a unique sign up form that tracks all collected information at the event and report back on the number of new subscribers to your marketing channels.

4. Influencer Sponsorships

Influencer marketing has gained significant traction in the past decade. Allocating a separate category for influencer sponsorships is now standard operating procedure in marketing budgets. Segmenting it allows businesses to track expenses spent on collaborations with social media influencers, bloggers, or celebrities. This helps assess the reach and impact of influencer marketing campaigns on sales and brand visibility.

An effective way to track and report back on success of influencer relationships is by providing your partners with a specific online code, or link that is trackable to sales. It is also common to ask an influencer to provide analytics of reach of their post (views, impressions, clicks, likes, and comments). 

5. Product Placement

Product placement refers to incorporating products or brand references within TV shows, movies, or other media. While these appearances can sometimes happen organically, they are most commonly paid placements. By tracking expenses in this category, businesses can evaluate the effectiveness of product placement in generating brand exposure and driving sales. 

An effective way to track the effectiveness of this tactic is to narrow the focus of the product and compare sales pre-launch and post-launch. 

6. Online Marketing Software

Online marketing software expenses cover tools and platforms used for digital marketing campaigns, including email marketing, social media management, SEO, and analytics. This category enables businesses to monitor software expenses and their impact on campaign performance and conversion rates.

Within these platforms you can run analytics reports that detail the number of opens, clicks, and purchases generated within a stated timeframe of sending the text or email to your customer base. It is also generally considered best practice to create online shopping codes that are unique to these channels to assist in the assessment of attribution. 

Are you using the right software to maximize revenue? We can help. Click here to learn more about setting up a software consulting review with our experienced team.

7. Experiential Marketing

Experiential marketing involves creating immersive brand experiences to engage consumers on a deeper level. By itemizing experiential marketing expenses, businesses can evaluate the impact of activations, pop-up stores, interactive events, or product demos on sales and customer loyalty.

Often times, measuring revenue generated by an experiential marketing installation includes scraping media and social mentions, evaluating reach, and calculating upticks in purchases within the geographic reach of the experience during a stated timeframe. 

8. Trade Marketing

Trade marketing focuses on collaborating with retailers or distributors to promote products in-store or online. Tracking expenses in this category helps assess the effectiveness of trade marketing campaigns in driving sales, increasing product visibility, and strengthening relationships with partners.

To effectively measure the success of trade marketing in third party retail stores, (perhaps with a sponsored percentage off discount or BOGO) brands often rely upon retailers to provide sales reports to indicate increases in velocity of sell-thru. 

9. Merchandising

Merchandising expenses involve designing and implementing in-store displays, visual merchandising, and product packaging. This category allows businesses to analyze the impact of visual presentation on sales and customer engagement.

Before and after installation sales measurements are the best way to evaluate the impact of merchandising on the customer's in-store purchasing journey.

10. Brand Ambassadors

Brand ambassadors represent the company and its products or services in various capacities, such as spokespersons, influencers, or event hosts. By itemizing expenses related to brand ambassadors, businesses can evaluate the effectiveness of ambassador programs in increasing brand awareness and driving sales.

What is the difference between brand ambassadors and influencers? Brand ambassadors often work for your company or are a 1099 contractor that is paid to exclusively promote your brand. These ambassadors often represent your brand at a trade show at your brand's booth.

To track the value, you can give ambassadors unique sign up forms, or landing pages that they send customers to that can track their impact in store or at an event.

11. Giveaways

Giveaways, contests, or promotional offers are an effective way to attract new customers and engage existing ones. Tracking expenses in this category helps measure the impact of giveaways on customer acquisition, loyalty, and overall revenue.

12. Digital Display Ads

Digital display ads include banner ads, native ads, and other visual advertisements on websites and mobile apps. By itemizing expenses in this category, businesses can evaluate the performance and impact of display ads on website traffic, conversions, and sales.

Generally a trackable cookie or link analyzes ad impact, impressions, clicks, and sales.

13. Digital Advertising

Digital advertising covers various forms of online advertising, such as search engine marketing (SEM), social media ads, influencer collaborations, and video advertising. Tracking expenses in this category allows businesses to assess the effectiveness of digital campaigns on lead generation, conversion rates, and revenue.

14. Radio, TV, Billboard, and Other OOH Spend

Traditional advertising channels like radio, television, billboards, and out-of-home (OOH) media still hold a high value in certain industries and target markets. Itemizing expenses in this category enables businesses to evaluate the impact of traditional advertising on brand awareness, reach, and sales.

Often times with these OOH advertising channels companies agree upon a formula to evaluate impact. For example, they may attribute any up trends in sales that occur online within fifteen to thirty minutes of a commercial airing on television.

Reporting and Analysis

To effectively analyze marketing spend and its impact on business revenue, it is crucial to report these expenses in a structured manner. An Excel sheet is a commonly used tool for this purpose. The following metrics should be considered when reporting:

1. Budget Marketing Spend vs. Budget Business Revenue: This comparison allows businesses to determine the percentage of marketing spend relative to overall revenue. It provides insights into the efficiency and effectiveness of marketing strategies. (Looking for a retail marketing budget that calculates percentage of revenue spent on marketing? Click here.)

2. ROAS and ROI by Individual Advertising Spend: Calculating ROAS and ROI for each marketing category helps identify which areas are generating the highest returns. This analysis helps optimize budget allocation and eliminate underperforming channels.

 

Itemizing marketing spend into various categories is essential for tracking ROAS and ROI. By understanding which categories of spend are driving sales, businesses can optimize their marketing strategies, allocate budgets effectively, and maximize their return on investment. Accurately reporting marketing spend and revenue in an Excel sheet provides valuable insights into the percentage of marketing spend relative to overall revenue, enabling businesses to make data-driven decisions and achieve better marketing outcomes.

 

 

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The author generated this text in part with GPT-3, OpenAI’s large-scale language-generation model. Upon generating draft language, the author reviewed, edited, and revised the language to their own liking and takes ultimate responsibility for the content of this publication.