Calculating ROI On Your Animated Video
There are 5 steps for calculating ROI on videos. We will approach them one by one. We will include a text description as well as a video. Choose whichever works best for you.
What Is Your Objective?
What is the goal of your video? You should try and bring it down to just one objective. If you can’t, then try to define your most important objective. The five most common goals are:
• Increased Sales
• Driving User Registration
• Lead Generation
• Brand Awareness
• Education
Decide On The Metric
How you can measure your video’s success?
These are actually quite easy. If you are an e-commerce site that is looking for sales, gross profit is a really good metric. App subscriptions are their own form of measuring metrics.
While lead generation is easy to track, it’s not automatic. You have to add leads directly from a contact form in CRM software to see your numbers. If you don’t have or use CRM or the web-to-lead functionality is not available to you, then put a pixel on your site that triggers a conversion event and reports it to a platform like Google Analytics.
Awareness is a very difficult objective to measure. While surveying is the most accurate solution, it’s the most expensive and can be awkward. Monitoring Google searches of your brand name or for particular terms you are interested in is within your reach as a monitoring activity on your site. You can measure if people want to learn more about your business or how much of the video is actually seen.
If you are using your video as a form of education, think about adding a quiz at the end of the course. If your video is a corporate culture-change video, measure the interest by monitoring visits to other URLs or measure the change of behavior you are trying to affect.
You Should Give A Dollar Value To the Metric
What achieved the objective worth? If it’s sales, the profit on each sale is what the site is worth to you. Remember to use your gross margin numbers and operating margin. This is because your fixed costs are fixed. Each additional sale brings you the gross margin in additional profit, not operating margins. If you are relying on sign-ups, ask what the registration leads to. If you are hoping to focus on user registration as an avenue, how many users would you need for how much funding? Divide the latter by the former. If users have advertising value, use that.
If you are looking for lead generation, you need to multiply the gross margin by the closing ratio which is the dollar value for each lead.
If for education purposes, calculate the business value from the knowledge you are providing. We created a job safety video for a major company. They told us the retention in their courses was as low as 10% and hoped our dynamic entertaining approach would increase the retention span.
Compare Performances
The most popular way to evaluate the performance of your video is using the A/B test. That’s when you deliver those videos to 2 different randomly assigned users
It might not be advisable to use this because it would take a long time to get the statistically significant numbers or to take advantage of your marketing asset right away.
If that’s the case, pick two comparable periods before and after the introduction of the video. Make sure the time frame is long enough to minimize statistical noise. If you can’t use comparable parts, make allowances for seasonal variations or other factors. If you have introduced a new website along with your video, both should share credit for the results that you have reaped.
Steps For Calculate The ROI
First, multiply the business value of each unit for the metric you have chosen by how much it has improved during the test period in order to find the value you gained during the test period.
Next, pro-rate this value so that it extends over the period in which you are amortizing your investment.
Finally, calculate how these returns compare to your initial video investment.
To show the calculation for lead generation videos, it’s a little more difficult than other purposes. You need to figure out the value of a lead before starting the process above.
Let’s take a hypothetical consultancy business. Last year they received 1,000 leads and closed 50 which means their closing ratio was 5%. They had 50 contracts with an average value of $20,000 and the total revenue was $1,000,000. The gross margin was 40% and they made a video for $20,000.
What is the dollar value of each unit? 40% Cross Margin multiplied by $20,000 average contract value multiplied by a closing ratio of 5% is $400. They tested
their new video for 3 months each year. In the before period, they received 250 leads. In the after period, the business received 300 leads. The Gained Value During Test Period was 50 leads multiplied by $400 or $200,000. They expected their video to work for one year so the Total Gained Value is $80,000. Subtracting the video cost of $20,000 to get 300% ROI us a good return!
Some might ask if a 20% improvement is just hoping, although the mileage may vary, it is our experience, that the answer is yes.
If you do not calculate the ROI on videos, you will not be able to know whether your video paid off or ended out costing you money. Calculating ROI is an important practice that will help you become a more effective marketer.