How to Calculate the ROI of Offline Transactions
In a way, e-commerce sites have it easier than offline companies who need to get a sales person involved in each deal. When it comes to measuring your AdWords ROI, it’s waaaay easier to measure performance when you have an e-commerce transaction with a specific value at the end of the chain.
An online store can easily set up e-commerce tracking through Google Analytics to see which ads lead to the highest sales, but when you involve a salesperson offline, you lose all of the keyword and ad data, right?
The problem with measuring offline transactions
Picture this – you’re a company that sells electric fences. People who buy electric fences know they need electric fences, but they don’t know what type, size, etc. they need. That’s where the product specialist (aka salesperson) comes in. After they fill out a form online, the salesperson calls them, asks questions about their project, recommends a solution and makes the sale.
Looking at this scenario initially, it sounds difficult to determine which ad campaigns deliver the best leads (the ones that are most likely to turn into the highest-value offline sales). But let’s give it a try and see what we can do!
In the electric fence example, your sales funnel would look something like this:
We can measure which ad campaigns lead to form completions (conversions), but how do we know which ones lead to actual sales?
You Need Marketing Automation or a CRM that Tracks AdWords Data!
Marketing automation delivers personalized communications to prospects based on their interactions with your website, emails and ads. Some features of marketing automation include: dynamic website content, segmented email communications (drip email campaigns), visitor tracking, landing page creation, A/B testing, workflow automations, call tracking and analytics.
CRMs (customer relationship management systems) can be part of marketing automation systems or sold as software on their own.
They come in all shapes and sizes. A quick Google search of “marketing automation” or “crm” will yield a plethora of results.
Almost every marketing automation system out there tracks visitors and leads from their first interaction with your website all the way through to the moment they become a customer, which is key to what we want to do here.
What we’re trying to do requires a system that integrates with AdWords and links ad cost data with specific leads, as well as provides aggregate summaries of ad ROI.
How Marketing Automation Helps You Measure Offline ROI
Here’s how it works: When someone visits your site from an AdWords ad, marketing automation captures the ad data and associates it with the visitor. When the visitor becomes a lead (by filling out a contact form), marketing automation puts a name to the anonymous data.
When your salesperson finally closes that lead – whether it be tomorrow or a month after the day they first clicked on your ad – they enter the sale information (volume, price, etc.) in your CRM or marketing automation system. The system attributes the sale to the exact ad and cost-per-click that brought the customer to your site.
What kind of insights can I get if I set this all up?
Ultimately, you’re taking traditional ad campaign performance metrics and adding sales volume and cost to the end, so this…
Knowing which lead came from which ad campaign is useful already, but when it’s aggregated you’re able to get a big picture view of ad campaign ROI. You can answer questions like:
- Which ad campaigns get people to JUST visit my website vs. which ad campaigns are most likely to get people to visit my website AND become paying customers?
- Which ad campaigns drive visitors who are most likely to turn into high-paying customers vs. being low-paying customers?
Here’s an example of a report from a popular marketing automation system, showing ad-level ROI:
How to calculate ad campaign ROI
To get the ad campaign’s ROI, use this equation:
Example: Campaign A cost $500 and resulted in $10,000 in new sales, and Campaign B cost $1,000 and resulted in $2,000 in new sales.
Campaign A ROI = ($10,000 - $500) / $500
Campaign B ROI = ($2,000 - $1,000) / $1,000
This tells us that Campaign A results in way more dollar-value sales than Campaign B and delivers a much higher AdWords ROI. With this information, you could do any of the following:
- Double down on Campaign A
- Work to further optimize Campaign B so it performs better
Isn’t that better?
Too often ad agencies and marketers focus on impressions and clicks. But at the end of the day, a company’s ad spend better be generating business (real dollars) otherwise it’s going to end up on the chopping block. Although it’s easy to measure ad campaign ROI with online transactions, it’s a challenge when transactions occur offline with a salesperson.
Marketing automation isn’t for everyone, but it does bring the value of tracking these on and offline activities all in one place so you can get clear insights into campaign performance. When you know which campaigns are driving actual business and which ones aren’t you can double down on the ones that work and cut out the underperformers.
If you’re not currently using a marketing automation system, I’d encourage you to check out what’s out there, and if you are using marketing automation, start using the AdWords integration if it’s available for your platform!
About the author
John Rau is a Campaign Specialist at Accel Web Marketing, a WordStream client that helps companies set up marketing automation systems and run online advertising campaigns.