Despite the advent of digital marketing, there are still plenty of businesses that use promotional merchandise for their marketing strategies. Whether it be giving away products at trade shows or handing them over as recruitment gifts, promotional products help create goodwill for both the giver and the recipient. When used correctly, promotional merchandise can enhance brand awareness and convey a positive brand image in the eyes of consumers.
However, the subject of measuring ROI (return on investment) for promotional merchandise has been an ongoing debate. Marketing experts are still figuring out how to calculate the effectiveness of promotional products for their business. While measuring ROI on promotional merchandise can prove a bit tricky, there are a couple of ways you can calculate it. Today we’ll discuss a variety of methods to help you measure ROI on promotional products more accurately.
What is ROI?
Simply put, ROI means return on investment. It’s a performance measure that’s used to measure the effectiveness of an investment or compare its efficiency to other business investments. ROI is about measuring the amount of return on a certain investment, relative to its cost.
ROI is a widespread metric used by many marketers because it serves as a good measuring stick to determine the profitability of an investment. You want to make sure you’re making the most out of your marketing dollars by tracking your ROI, especially when you’re using promotional products as part of your marketing strategies.
Ways to measure ROI on promotional merchandise
Calculating the ROI on promotional merchandise can prove challenging since you don’t know exactly which sales were generated from the promotional products. Hopefully with these methods, you’ll be able to measure ROI on promotional merchandise and see if you’re spending your marketing dollars effectively.
1. Incremental margin approach
The incremental margin approach is one of many ways to measure ROI on promotional merchandise. This method involves calculating the incremental margin supported by the promotional products. This means checking whether the investment on promotional products adds value to the company or would the investment yield better returns when invested elsewhere.
To perform this method, deduct the incremental promotion expense from the incremental variable margin that the products have yielded. The resulting numbers are then divided by the expense amount. Here’s a formula for reference:
- ROI = (generated revenue – promotion expense) / promotion expense
2. Key performance indicators (KPI)
Key performance indicators are crucial for measuring the success of your marketing efforts. At the end of the day, you can best judge how effective promotional products are by looking at your revenue. Did you see an increase in sales growth after a trade show or exhibit? Or did it stay the same? Monitoring your revenue after giving away promotional products can serve as a good measuring stick for its ROI.
The same thing applies with leads. The more leads you acquire, the more sales opportunities get. Promotional products generate interest from recipients, which is why it’s crucial to track your leads to see if investing in freebies and tchotchkes are worth it.
3. Unique URLs
Unique URLs are also great for measuring ROI on promotional merchandise. Say you print a special Google Voice number on your promotional products. You can then measure inbound calls through Google Analytics easily. The same thing applies to unique URLs where Google Analytics provides in-depth reports on traffic counts and other quantifiable data to help you measure the effectiveness and ROI of your promotional merchandise.
The only caveat with unique URLs is that you may miss on potential customers that just Googled your business instead of using the unique URL provided.
4. A/B testing
A/B testing enables you to isolate your variable and figure out how effective it is compared to your other marketing campaigns. In this case, the variable you’re testing is the promotional merchandise. There are multiple ways you can set up A/B testing, with the most effective being a geographically-run campaign.
You can hand over promotional products in one location and run your other campaigns elsewhere. If you notice an increase in sales in that location, you can attribute the sales growth to your promotional products. The sales generated will be your profit number from your promotional products.
A second option is to measure your sales when you’re running promotional merchandise as your only campaign. Simply run the campaign and measure how much your sales has increased. This enables you to better calculate the impact of promotional products on revenue without other campaigns possibly contributing to it.
5. Return on impressions
Many companies who use promotional merchandise track return on impressions to measure its ROI. Since promotional products are designed to increase brand awareness, it makes sense to track how many people are viewing your brand from them. The more people who view your brand, the more likely your sales will increase.
Some marketers undervalue impressions which is a huge mistake if you ask us. In reality, the experience that your target audience receives when interacting with your brand is what creates the foundation of public opinion regarding your business. While impressions are not the most accurate in terms of measuring ROI for promotional merchandise, it will be a determining factor over your company’s bottom line in the future.
Whether you decide to measure your ROI calculations via A/B testing or if you prefer tracking them via return on impressions, these methods will help you determine the effectiveness of promotional products on your sales growth.
Examples of ROI
The return on your investment is measured against the value of promotional products and will help you decide how best to apportion your budget.
A Scenarios with a $2,000 product budget.
- 0.50c per item on 4,000 units disposable short term such as a fridge magnet may reach 4,000 potential new clients.
- $1.00 per item on 2,000 units of a promotional product may reach such as a ballpoint pen.
- $10.00 per item on a quality gift such a vacuum drink bottle or cooler bag maybe suitable for top 200 clients as a thank you for on-going business and kept by your customer as useful product for many years.
ROI on a $2,000 budget
- A $1.00 item given out to 2,000 prospects isn’t necessarily a poor quality product that won’t deliver leads as the economics of scale can deliver results.
- Always test and measure with a unique phone number or web portal to confirm the origin of the leads.
- At Value Added Promotions we know the probable frequency of exposure that each product type may yield. We can assist you compare cost per impression for your product options.
Working from a budget
|What is your maximum budget||$2,000|
|Quantity of potential prospects that your wish to reach.||100|
|Are all receipt ants top clients ? all the same level||$20|
|If not Split budget 80/20||20%=$1600 & 80%=$400|
|If so, How much per item will you spend ?||20 Items at $80 80 items at $5|