Marketing ROI for Your MLM
copyright, 2016, Debbi A. Ballard All rights reserved worldwide.
Do you know the marketing ROI for your MLM business?
ROI refers to return on investment. Competent MLM owners and corporate managers track the marketing ROI for any campaigns they utilize in creating sales.
MLM companies in pre-launch or launch modes, for example, engage in conducting various marketing campaigns since they need to build a strong foundation of new networkers and loyal customers. Management wants to know that monies invested in their marketing efforts are giving them a good return. They want to compare how campaigns differ in their results and which ones provide the greatest ROI.
But here’s the deal…
How many networkers are taking the time to track their marketing efforts so that they, too, can compare results to maximize their marketing ROI?
Today millions of networkers are marketing offline and online. Many of the top tier networkers have mastered digital marketing as well as the traditional face-to-face marketing. They are reaping the benefits of acquiring those skills and understand the importance of examining their marketing ROI.
However there are still the overwhelming majority of networkers who are not sure as to how they can go about measuring the ROI of campaigns they conduct.
In this video by marketingmo.com, three examples are given as to how you can calculate your marketing ROI. They include a basic calculation based on Cost of Goods (COGs), another based on Customer Lifetime Value (CLV) and a third option based on Gross Profit Percentage.
Marketing ROI Using Basic Calculation with COGs
What is your Marketing Investment?
(cost of ad campaign, trade show event, etc.)
How many units did you sell?
What was the price per unit sold?
Total Revenue (number of units x price)
What was the COGs for the units you sold?
(Multiply the cost you paid per unit x the number of units sold.)
Total COGs equal the result of the multiplication completed above.
Gross Profit = Subtract your Total COGs from your Total Revenue
ROI = Gross Profit minus your Marketing Investment then that amount is divided by your Marketing Investment. Multiply that result times 100 to get the ROI percentage.
Marketing ROI for your MLM Example
So if you sold $1000.00 worth of products and your cost was $500.00 (at wholesale pricing along with any rebates/commissions received), then your Gross Profit would be $500.00. If the cost of your Marketing Investment was $200.00, then your marketing ROI would be 150%.
(Your Marketing Investment can include expenses relating to lead generation, ad campaigns, costs associated with exhibiting at a trade show, taking a prospective customer out to lunch, etc. If you conduct home parties to sell your products, you can include food, beverages, special gifts and other sales incentives you provide. It is your option to designate as part of your Marketing Investment any monies spent in creating sales, securing a new customer or a new downline networker.)
Marketing ROI Using Customer Lifetime Value (CLV)
This scenario is just one theoretical example of a networker who does a campaign to secure loyal customers who like to have their products automatically shipped out on a monthly basis. This is something that is often referred to as a preferred customer order.
What is your Marketing Investment?
How many new preferred customers were created?
What is the value of each new preferred customer?
If each new preferred customer typically purchases $100 per month for at least 5 months and your profit is $40.00 per month per customer, then the average customer value for each preferred customer would be $200.00.
What is the Projected Profit?
How many new preferred customers do you project from this campaign?
Multiply that number of preferred customers times the average value of each preferred customer.
Marketing ROI = Projected Profits minus the Marketing Investment then that amount is divided by the Marketing Investment. The ROI percentage would be the final number x 100.
Hence, if you secured 20 new preferred customers, the average CLV total of those customers would equal $4000. If you spent $1000 as your Marketing Investment to secure those new preferred customers, then your marketing ROI would be as follows: $4000-1000 = $3000. $3000/$1000 = 3×100% =300% ROI
Examples are just theoretical illustrations. Everything is up to you and the quality of the campaigns you run along with the tracking and analytics you utilize. Run a poor marketing campaign of any kind and your ROI could be in the negative. Not good.
As a networker, you should also always apply this additional formula in calculating marketing ROI for your MLM business. This is because most MLM companies have products that lend themselves to recurring sales and also allow networkers to build a sales force of other networkers who can create recurring sales. The recurring sales can be, for example, monthly nutritional product orders, monthly beauty product orders, etc.
Obviously, recurring customer sales can equate to increased Customer Lifetime Value. When that is paired with a productive downline sales network, the value of each productive networker can be high. This is because the downline networker can personally create recurring customer sales and can develop more productive networkers who do the same. So the lifetime value to you of a productive downline networker can be extremely valuable.
However, don’t confuse potential with reality.
When you dive into the numbers, only then can you get a realistic view of what is happening in your downline network as you analyze reports you get from your mlm company and examine other data that you collect.
As a networker working to grow your business, you want to keep track of several important metrics. However, for our discussion here regarding CLV, and to simplify things to focus in on the basics, look at the following:
- those people who are customers only and are NOT a part of the business. How long does each typically continue to place consistent monthly orders and what is the average monthly order? Also, it is good to keep track of the percentage of those who decide later on to become networkers and then look at the next category below to continue tracking their activity.
- those customers who are also a part of the business as networkers. Examine what percentage of this group is actively engaged in the business AND what percentage are not actively engaged in the business at all. For the ones actively engaged in the business, what is the average amount of their monthly personal customer orders? How long does the average networker in your downline stay actively engaged in the business?
Customizing and inputting into the CLV formula can give you a better picture of what is really happening in regards to the value of your customers and the value of your networkers. Define those terms (customers and networkers) according to the mlm compensation plan under which you operate. Take note of what you consider to be the amount of monthly personal orders of those downline networkers who are “actively engaged.” Depending upon your compensation plan, you might look at other time parameters such as daily or weekly orders instead of monthly. You can also differentiate the value of networkers to you who are at various ranks. There are many other factors you can input. Focus on what is important to you in your particular mlm business.
There is a third marketing ROI calculator discussed in the video. Take a look at that as well to see if you would like to use that option. Just remember that regardless of what is being sold or how it is being sold, when you know the marketing ROI for your mlm business, you can then work to maximize that ROI. That will enable you to enjoy greater profits and greater growth (along with subscribing to my mlm newsletter if you have not done so yet).
Debbi A. Ballard introduced the world’s first comprehensive marketing and management consulting services for start-ups and established multinational firms in the mlm (network marketing) industry. A consultant, speaker, author and expert witness, she is considered a trusted authority and visionary in that industry. She is also recognized for her innovation and leadership relating to the convergence issues that impact network marketing and affiliate marketing. Thousands of corporate owners, managers, networkers, and affiliates subscribe to her firm’s newsletter, MyNetBrief(tm), for news, research and valuable tips.
About the Author: MLM Consultant, Expert Witness, Author, Blogger, Speaker and CEO of International Network Liaison Corporation...but more importantly, wife, mother, daughter, aunt, cousin and friend.
