A bit more about ROI

Understanding ROI? Hmmmmm...

Why bother? Well most don’t but if you start getting into the habit of looking at your marketing spend and analysing just what it generates you may very quickly realise that you’re facing the wrong way. It can be a serious wakeup call and when applied to the potential returns from online marketing be a “Road to Damascus” moment.We ran an articale at the beginnng of the year about ROI being King and the result was a few emails requesting more information on how best to interparate Return on Investment. So we have tried below to give an insight from our perspective.

The oft raised issue with online marketing is understanding just what you’re paying for when it comes to your website and associated spends. Using a basic ROI calculation may help you understand just a little bit better why diverting your spends towards your online marketing is well worth considering.

Very basically Return On Investment is calculated by working out the returns on your activities against the resources put into achieving those results.

In formula terms ROI % = ((Returns – Investment)/ Investment) x 100

Calculating Returns

Returns on investment should not be based on simple sales but the contribution or Gross Profit figure. Room sales should, for example, include the additional Cost of Goods Sold (COGS) including servicing, commission paid on the sales and other directly related costs.

While many marketers will happily calculate the ROI based on sales only it is not a truthful figure for your business and you should always use the Gross Profit figure. An online marketing campaign aimed at increasing room sales must be calculated on gross profit of those sales not the total sales. Similarly so should any F&B promotion or campaign.

Therefore the figure can more accurately be represented as

Return on Investment = (Gross Profit – Investment)/Investment
Simply divide it by 100 to calculate your percentage

Calculating Investment

For an online marketing campaign for example, the following annual costs should be included in the investment side of the calculation.

• Website design costs
• Pay Per Click Costs
• Emarketing costs
• Project Management Time

We would suggest that direct cost of the sales is calculated in the returns side of the equation. For instance for a restaurant promotion

Website Design Costs

Obviously include the development costs but ensure to spread the costs over the lifetime of the site. Don’t plan to hold on to your website for more than two years – so spread the costs over the projected lifespan. Include all related costs for maintenance, hosting, email services.

Pay Per Click

Online advertsing costs are easily managed. Set a planned budget for the year but track results. Is it converting to bottom line?

Look at your offline advertising budget and consider matching it (not always appropriate but good starting point – remember ROI!)

Emarketing Costs

• Licence or fees - £20 - £50 per month?
• Build in time to write newsletters – 2 hours each?
• Analysis – 1 hour a month?

Project Management Time

Be realistic and include the time you or a member of your team need to devote to making the project work. In online marketing time is the most precious resource and without allocating it your online projects will fall short

• Management of direct online availability – Five hours a week?
• Management of website copy – two hours a week?
• Management of Blog articles – five hours a week?
• Facebook and other social Media – five hours a week?
• Management of Review sites (such as TripAdvisor)and website references – two hours a week?

Only you can look at the time you have for your online marketing costs but whatever you do make sure you use an estimate and don’t discard. To achieve results online someone’s time is required. The website, the social media, the booking engine, the search engines are the vehicles available for your business but you have to take the responsibility of getting behind the wheel and driving the vehicle.

An online marketing campaign without a driver should not be expected to reach your destination on time or on target

Calculation of Return on Investment – Web Campaign
Returns
Estimated Additional Sales	25000
Gross Profit %	85%
Return (Gross Profit) on Additional Sales	21250
Investment
Project Costs	2500
Costs of Time	2500
Total Investment	5000
ROI	3.25
ROI %	325.0%

ROI is King!

Excuse the schoolboy French pun but as we move into 2010, Return on Investment really is King.

Every penny spent must lever the maximum return possible in all areas of the business. No more so than with online marketing.

So what should you plan to do in 2010?

Well this year is being labelled by many online marketing gurus as “The Year of The Independent”. So what does that mean?

Well in our eyes it means that the technology has come of age and now allows the independent operator access at an affordable cost to the same tools previously only available to the larger operators or to the Online Travel Agents (OTAs)

Accommodation providers need to focus on developing online marketing initiatives that bring the highest rates of return in terms of higher rates, lower commissions and the most bookings.

So what should you’re online focus be for the next twelve months? Well it should be the things that have got the best means of providing the Return on Investment.

Concentrate on the basics as they consistently bring in the most bookings and the highest returns. Some industry analysts estimate that more than 75% of hotel website bookings originate directly from these four basic areas alone.

• Website Redesign
• Search Engine Optimisation
• Paid Search
• Email Marketing

Website Redesign
If you haven’t done your website in the past eighteen to twent four months then it is most likely that it requires some sort of surgery. New technology will have passed it by, the design may be dated. A new website with positive images, rich content and integration of social media is now a basic of any hotel website.

It almost goes without saying that a fully integrated online reservations system such as Bookassist is essential.

Search Engine Optimisation
No point having the best website in the world if no-one can find it. Don’t expect loads of business just because your hotel name comes up first. The vast majority of your potential bookers are not looking for you by name. We’ve developed our own 3-6-9 SEO Audi which will help you analyse your website not only month on month but against your key competition. Management of SEO terms and your website content is an ongoing process that once again can provide stunning increases in traffic leading to greater opportunity to convert.

It is essential and whilst the investment may be unseen, the results are not.

Paid Search
If used without caution it can be expensive but managed properly pay per click can provide excellent rates of return on the money spent. It really is worthwhile to allocate a decent budget to paid search for 2010 and monitor click throughs and bookings generated. It can be easily managed and monitored and should not be overlooked.

Email Marketing
Direct contact with your previous customers is maybe an accepted principle but it like the other basics above requires creativity and strategic planning. It’s no longer just about sending out brochures. It may involve post departure email questionnaires, deep linking to exclusive offers and certainly strong management of the design and content of newsletters. Mailing to customers who know you is very rarely viewed as junk or annoying, it may not be relevant at that particular time but one of those occasions it will push the button.

If you can focus the majority of your 2010 online marketing budget and efforts on these four areas and monitor your results so that you can allocate more of your budget to those specific elements in each initiative that works.

It doesn’t mean you systematically ignore Social Media and other offline tools but get the basics right when money is tight and can see dramatic increases in Return on Investment.

For more information on improving your ROI give us a call on 01292 521404 or send us an email

Positive Start For 2010 for Scotland's Online Reservations

The New Year has started positively for Bookassist powered properties throughout Scotland according to Ian McCaig from the Ayrshire office.
"The first few days in January are showing fantastic growth on the beginning of last year and we're hopeful that this is a pattern that can be continued throughout the remainder of the month.Hotels are understanding much more clearly the need to grow their direct online sales and for the more proactive amongst them this is producing clear results."
He continued, "As well as providing a highly specified booking engine to the guests which makes it easy to book, hoteliers are beginning to recognise the need to support the reservations engine with marketing activity. A booking engine on its own is no longer enough. A site needs to portray their product graphically and attractively, it must ensure that the site is being found for the appropriate search terms by the appropriate markets and then Bookassist will convert and we believe convert more highly than any other online reservations system."
To achieve the above, Bookassist in Scotland don't only provide the online booking system but also the knowledge and marketing support to help secure the increase in direct sales that is required.
"Of course we understand why hotels have been looking to Online Travel Agents over the past year. The market for some areas in Scotland has been flat and reservations from any source are welcome but we don't beleive that this should be at any cost.
It's a simple question that we ask of our prospective clients; "Do you think the demand for booking direct through your own website is going to increase or decrease over the coming decade?" It may almost be a rhetorical question for sure but it focusses the mind on the need to take the provision of the online reservations service more seriously and actually plan strategically in order to speed up the growth."
Businesses who are looking at their online booking options are being encouraged to look at their whole online marketing strategy by the Scottish Bookassist team - search engine optimisation, paid advertising, e-marketing, social media (with purpose), guaranteed best rates, merchandising of rooms and add on products, online agency and corporate relationships and even best practice in designing a new website.
"All of these areas require not only consideration but action. We see examples of hotels plowing hours of time and hundreds of pounds a week into their local newspaper advertising and radio schedules and then skimming over their online marketing programmes and website content. It is our resolution in 2010 to work even more closely through our account management structure to build the understanding of how integral to all areas of their business an online strategy must be - even to the smallest of operators"
If you wish more information on building your direct online reservations contact scotland@bookassist.com or telephone +44 (0)1292 521404.