Promotional products are an excellent way to increase brand awareness and generate leads for your business. Notwithstanding, it’s essential to calculate the ROI for such products before investing in them. This article will discuss and explore how to calculate the ROI for promotional products and provide tips for getting the most out of your investment.
Factors to Consider When Calculating the ROI for Promotional Products
The Cost of the Product
When calculating the cost of ROI marketing for a product, it’s essential to consider the product’s price. This includes the cost of the product itself and any shipping or handling fees.
Promotional products can range in price from under one dollar to literrally hundreds of dollars. It’s important to consider how much you’re willing to spend on products and whether or not the cost is worth it.
If you’re looking for a low-cost promotional product, consider items like pens, keychains, drink coasters or magnets. Alternatively for a high-cost product, consider things like custom T-shirts or branded laptops depending on your target market.
It’s very important to find the right balance between cost and effectiveness. You don’t want to spend too much on product marketing that no one will use or appreciate, but you also don’t want to spend too little on a product that isn’t effective.
The Target Audience
When choosing a marketing strategy for a product, it’s essential to consider your target audience. Products should be selected based on the interests of your target audience.
For example, if you’re targeting young adults, you might consider a water bottle or gym bag. If you’re targeting parents, you might consider a coffee mug and office accessory.
It’s important to consider the interests of your target audience when choosing a product. This will help ensure that the product is effective and that you’re not wasting your money on a product that no one will use.
The Goal of the Promotion
When calculating the ROI for promotional products, it’s essential to consider the goal of the promotion. Are you looking forward to increasing sales? Increase brand awareness?
The goal of the promotion will determine which product is right for your business. For example, if you’re looking to increase brand awareness, you might consider a promotional item used daily, like a coffee mug or water bottle.
If you’re looking to generate leads, you might consider a promotional item that requires contact information, like a pen or keychain.
The Quantity of the Product
The more products you order, the lower the cost per unit. With that said, you don’t want to order too many products and end up with an extensive inventory that you can’t adequately distribute. It’s crucial to find the right balance between quantity and cost.
The Timing of the Promotion
The sooner you can get the product in the hands of your target audience, the more effective it will be. You don’t want to order too early and end up with an extensive inventory that you can’t get rid of. Finding the right balance between ordering too early and not ordering soon enough is essential.
Ways to Calculate ROI for Promotional Products
There are a few different ways to calculate the ROI for promotional items. The most important thing is to use a method that makes sense for your business and that you can track. The following are some of the commonly used methods.
Cost per Impression
The cost per Impression is the cost of the promotional product divided by the number of impressions. For example, if you spent $500 on a promotional item and 100,000 people saw it, your cost per Impression would be $0.005.
To calculate the ROI using this method, you would subtract the cost per Impression from the value of an impression.
Value of an Impression = Cost per Impression x Number of Impressions
ROI = Value of an Impression – Cost per Impression
Sales Method
The sales method is the most direct way to calculate the ROI for promotional items. To calculate the ROI using this method, you would subtract the cost of the promotional product from the sales generated
ROI = Sales Generated – Cost of Promotional Product. For this model you need a measurable call to action written on the product. For example a special website link for enquiry, or dedicated phone number would allow you to directly record such activity and ultimately how many equate to sales or new business.
Brand Awareness
The brand awareness method is the most indirect way to calculate the ROI for promotional things. To calculate the ROI using this method, you would subtract the cost of the promotional product from the value of the brand awareness generated.
Value of Brand Awareness = Cost of Promotional Product x Number of People Reached
ROI = Value of Brand Awareness – Cost of Promotional Product.
In reality it is very difficult to generate much data on this metric unless you actively survey or speak to your target market receiving your product.
Return on Ad Spend
The return on ad spend is the most common way to calculate the ROI for online promotions. To calculate the ROI using this method, you would subtract the cost of the promotional product from the sales generated.
ROI = Sales Generated – Cost of Promotional Product.
Lifetime Value
The lifetime value is the most long-term way to calculate the ROI for products. To calculate the ROI using this method, you would subtract the cost of the promotional product from the value of the lifetime customer value.
Value of Lifetime Customer = Cost of Promotional Product x Annual Revenue Generated by Customer
ROI = Value of Lifetime Customer – Cost of Promotional Product
For example, if you spent $500 on a promotional product and it generated $100 in revenue each year for the next 20 years, the value of the lifetime customer would be $2000. The ROI would be $1500 (300% return on investment).
Which Method is Best?
The best method to use depends on your business and tracking your results. If you can track the number of impressions or leads generated, the cost per impression or cost per acquisition methods are the best options. If you can’t follow the number of impressions or leads generated, the sales method is the best option.
No matter which method you choose, make sure you track the cost of the promotional product and the value of the results it generates. This will ensure you accurately calculate the ROI for promotional equipment.
Once you work out an accurate way to measure ROI, you are then in a position to try different products or revised designs. This can help define which product gives a greater Return on Investment.
Promotional products can be a great way to increase brand awareness and generate leads or sales. Its essential to calculate the ROI for promotional equipment to know whether they are worth the investment.
Just remember if you can’t measure it, you can’t improve it. This means developing promotional products could be a valuable as flushing lots of good marketing budget down the drain. Definitely a strategy to consider wisely!
