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There are just three things that you need to know when trying to determine your ROI for any given action.

• Cost of the marketing effort
• Traffic brought due to the marketing effort
• Conversions made

With this information, you can easily determine your ROI simply by checking what the value of your conversions is versus the value of the marketing effort. So, if you spent 1000 dollars sending traffic to a particular sales page, and made 2000 dollars, then your ROI is 100 percent. Now you can spend that 1000 dollars over again to make more money.

Not all conversions are monetary. For example, sometimes a conversion will simply mean that someone signed up to your newsletter. In that case you can compute the cost of acquiring the list member by dividing the cost by the number of sign-ups. This will be your cost for acquisition.

Later you can use that cost to determine ROI as the list converts those sign-ups to bying customers. If it costs you 20 dollars to get each list member and you make an average of 50 dollars off each list member, then you know that it’s worth the effort.

The problem is, most people don’t keep track of any of this type of information. Instead, they just work in the dark trying to make plans to accomplish success without even understanding what actions are bringing success. This is no way to conduct a business. In order to accurately measure ROI, it’s important that you know going in how you’ll measure it and what to keep track of.

To keep track of things, you can create a chart of all your expenditures and all your income so that you can figure your ROI. The most important numbers are what you spent versus what you made. Once you settle in on that, the other information will still be important, but this is the final verdict and will answer the question of “did this work?”

Define your metrics, implement tools that can measure the progress, and then use the results to inform future action. Share them with stakeholders and others who help you make decisions. Compare the results to industry averages to find out how well you’re doing compared to others. Seek to work on improving the numbers now that you know them.

Please share your thoughts on this in the Comments section below.