5 Steps To Calculating Your ROI From Animated Videos

May 30, 2015

Love is all you need, yes. That’s what you—being a person—need. But your business? Your business needs money. While it may not be the stuff of pop ballads, return-on-investment, or ROI, is one of the best ways to calculate what your business needs. You’re constantly looking for new ways to improve your bottom line—ROI is how to tell if a new investment is worth it.


For some things, finding the ROI is easy as pie. Let’s say you own a mom n’ pop pie shop. You buy an industrial oven for $ 10,000 that allows you to cook and sell twice as many pies, earning $ 25,000 in extra revenue over the course of the oven’s life. Boom: that oven investment just earned you 250 percent return.


Reckoning the ROI for a top-notch animated video, however, is rarely so easy. That’s why we’re pulling together this helpful guide. While finding the ROI of your video after the fact is a great way to keep tabs on its effect, perhaps the most valuable use of calculating your ROI is projecting it into the future—and determining how much you could and should spend.


As we’ve covered in the past, there are many tiers of animation studios, all at different price points; projecting the ROI of your video can help you make the right choice. In fact, it may not even make sense to invest in a video at this point—that’s exactly what ROI can help you find out.


Prefer to watch rather than read? Don’t worry, we won’t be offended—we certainly believe in the power of video. Check out our five-part video series on ROI by IdeaRocket founder and Creative Director, Will Gadea. Click here for a handy-dandy printable PDF, too.


Without further ado, let’s jump into it. Here is how to calculate the return on your investment from a high-quality animated video.


1. Define Your Objective


Everything happens for a reason—or at least it should. You’re interested in producing an animation not because it sounds fun (though it is), but for a higher purpose. Actually, you’ve probably got several aims in mind.


At IdeaRocket, we make all kinds of animations for all sorts of reasons. The most common goals include increasing sales (e.g., e-commerce), driving user registration (e.g., building an online community), generating leads (e.g., B2B sales), brand awareness (e.g., a new solution hitting the market), and education (e.g., an industrial company communicating new safety policies).


Identify your most important objective. If you’ve got more than one (as you probably will), it’s still critical for you to prioritize one. Resist the urge to consider them all equally important—the idea here is that we’re moving away from nebulous wishy-washy feelings and instead getting down to brass tacks and finding hard facts.


2. Decide The Metric


Got your goal? Great. Now we’ve got to figure out how you’ll measure it. If your goal was to sell more, tracking it is pretty self-explanatory: watch your sales numbers. User registrations are also rather straightforward. Lead generation? Count the leads coming in, along with your conversion rate.


If, however, you’re looking to gain awareness, the answer may not be staring you in the face. Seems a bit fuzzy, right? Check out your Google Analytics for cold, hard figures on how often people are visiting your site, how long they’re spending on it, and—most importantly—what they’re doing after they watch your video. You can also measure how often people are searching for you and how often your brand is mentioned on social media.


Perhaps the fuzziest goals are educating your team or instilling values. A friendly pop quiz can help quantify how well viewers retained the info. For values, you’ll have to consider the benefits of your desired culture shift: lower turnover rates and more employee referrals could work quite nicely.


3. Assign A Dollar Value


This is where the rubber meets the road. You’ve got your goal, you know how to measure it—now you need to know how that metric converts into dollars and cents.


If you’re trying to increase sales, calculate the gross margin (rather than operational margin) for each sale. If you can’t get exact figures for all sales, find a round number that the average sale brings in. If you’re building a community, consider how much profit each user is worth—if your site is mostly fueled by advertising dollars, for example, figure out how many impressions the average user brings and how much your company can earn from that.


When generating leads, be sure to calculate down the funnel to find the value of every lead: understand your average close rate and the average customer lifetime value (CLV, the net profit each customer brings) to solve for the value of a lead. If your close rate is 10% and your average CLV is $ 10,000, each lead is worth $ 1,000.


Building awareness, educating, and instilling values isn’t easily quantified, but do your best to get a real figure in mind. Doubling your web traffic can result in twice the sales. Well-trained employees can avoid million-dollar meltdowns and liabilities. A strong company culture can avoid costly rollovers and boost productivity.


4. Compare Performance


“Compared to What” isn’t just a classic soul standard—it’s also a question you should be asking once your numbers start to roll in. You’re earning $ 10 million in annual sales? Awesome, but compared to what? If you can’t compare your metrics against a control, you can’t isolate the effect your animation is having.


In a perfect world, you’d run an A/B test, showing half of your target audience the video, not showing the other half, and measuring the performance of the two groups against each other. This is actually easier than you might think if your goal is a web-based sale or sign up—sites like Unbounce make it easy to A/B test landing pages with and without video elements.


In reality, though, you may want to show your shiny new video to everyone you can, rather than restricting the audience for the sake of analysis. Or, for the fuzzier metrics, running an A/B test may be more trouble than it’s worth. In those cases, compare performance of a correlating time period. Just remember to do your best to account for seasonal ups and downs, larger market trends, and any other marketing efforts you’re putting forth.


5. Calculate ROI


This is where the magic happens and you find your final result. You’ve identified your goal, chosen a metric, assigned value to it, and compared it against a control. Now you can see what difference your animated video made. Strictly speaking, ROI is calculated by taking the value gained minus the investment and dividing that by the investment.


So say, for example, you were looking to generate leads. After putting your video online, you saw your leads jump by 30 percent, gaining you an extra $ 30,000 compared to last year. If you spent $ 15,000 on an animation, you solve for ROI by subtracting investment costs from value gained ($ 30k – $ 15k = $ 15k) and dividing that by the investment cost ($ 15k / $ 15k = 100 percent), meaning your reaped a 100 percent return on your initial investment. In effect, you’ve turned one dollar into two—abracadabra.


Whether you’re considering an animation, trying to find the price point that works for your business, or interested in the effectiveness of your already-produced video, calculating your ROI is a simple, smart way to show your business some love.

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