By Stacy Zemon, Editor & Chief Scribe
Metrics are the foundation for any successful DJ company’s marketing strategy, but most companies fail to use many of these important metrics to calculate success or failure. Too often, they focus heavily on the number of new leads generated, which ignores many of the complex formulas that can determine the true success of any marketing strategy.
With the increasing number of marketing options and strategies, DJs need to stay ahead of their competition. To help formulate an effective strategy, it is imperative that you understand these critical metrics and their formulas.
1. ROI (Return on Investment).
ROI is the most common formula and probably the easiest to understand. ROI is a measurement tool used to calculate the effectiveness and value of an investment. It shows the gain and/or loss of an investment by comparing and measuring the amount of return on an investment with the investment costs.
For example, a company makes an investment of $5,000 into Google AdWords and generates $10,000 in net profit. This would be a 100 percent ROI. The formula would look like this: ROI = (Net Profit / Cost of Investment) x 100. Divide the return of an investment by the cost of the investment, and the result is a percentage. In this case, ROI = ($10,000/$5,000) X 100.
2. CPA (Cost Per Action).
CPA is referred to as Cost Per Acquisition, Pay Per Action or Cost Per Action. It is a formula that measures the amount a business has paid to attain a conversion. CPA is also used to define a marketing strategy that allows advertisers to pay for a specified action, such as making a purchase or filling out a form from potential consumers. CPA campaigns are relatively low-risk, as costs are only accumulated once the desired action has occurred.
Most companies define CPA as Cost per Acquisition. For example, a company invests $1,000 in a SEO campaign. They received 100 new customers specifically from SEO. Their CPA is $10/customer. The formula is CPA = (Cost/ Conversions). Divide the cost of the ad campaign by the conversions.
3. ROAS (Return On Advertising Spend).
Simply put, ROAS is a tool used to measure the profit made from advertising. It’s the most useful metric to evaluate the performance of marketing campaigns, as it measures how much revenue you get back on each dollar spent on advertising. While ROI can give you an overall view, using ROAS formulas allows you to gain specific performance measurements based on every marketing network executed. For example, you can apply ROAS to specific campaigns and ad groups to receive a better perspective on the best direction for optimizing unprofitable advertising.
ROAS calculations will also tell you, at the most fundamental level, if your marketing channel is performing at a high enough level, which will allow it to be profitable. For example, a company spends $20,000 on Google Ads and received $60,000 in revenue. Their ROAS is $2 – ($60,000 – $20,000) / $20,000.
The formula: ROAS = (Ad revenue/ Cost of ad source). Divide revenue received from advertisement by the cost of the advertisement.