When John Wannamaker and then Henry Ford said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half,” people at the time chuckled approvingly. But I bet your Head of School or Board Chair wouldn’t find that very amusing.
In schools that are financially constrained and increasingly data-driven, you need to know whether every marketing dollar is working—not every other one. You need to be able to anticipate the results of initiatives and analyze their success.
That need for accountability is what makes ROI important. So, here’s a straightforward guide to what you need to know about ROI.
What is ROI?
ROI—Return on Investment—is a business tool used to measure an initiative’s net financial impact. In simple terms, it compares the required investment to the gains achieved. Many organizations, including many schools, use ROI to measure the success of their efforts.
School resources—financial, human, and emotional—are finite. When admissions or marketing teams pitch a video project, a social media campaign, or a new website, it’s reasonable for leadership to ask whether the return is worth the investment.
That’s where ROI come in. The single greatest benefit of using ROI to measure the effectiveness of marketing efforts is that it is empirical and therefore objective. It also makes it possible to establish trends within your school and to benchmark results with other schools.
Why ROI?
The need to quantitatively demonstrate the effectiveness of school marketing efforts is being driven by a number of factors:
- In most areas, there is now greater competition for independent schools
- A marked decrease in birth rates has created a corresponding decrease in the number of prospective students
- There is rising pressure for school leaders to be more business-wise and adopt strategies and tactics that will allow them to better manage school sustainability and growth
- Spending on marketing activity has long been regarded as a black hole with no proven results
Measuring ROI
ROI is expressed as a fraction, like this:
Incremental Results Produced by an Initiative [minus] The Cost of that Initiative
[Divided by]
The Cost of that Initiative
A minimally acceptable ROI is 2. That indicates that the incremental gain was twice the amount invested. However, the generally held benchmark for a good ROI is 5.
Incorporating ROI into the evaluation of enrollment and marketing initiatives
This may sound harsh, but ROI is all about money. It is the financial measure of an initiative’s value. That means that all of the formula’s elements have to be expressed financially.
An example may be helpful:
Let’s say you are measuring the ROI of adding a lead magnet to your website. The cost of the initiative would include the cost of writing and designing the lead magnet, the necessary website additions, and the cost of digital marketers who might be involved.
Calculating the value of the incremental results requires converting pipeline data into dollar amounts. If the lead magnet generates 200 additional inquiries, you need to convert that into additional tuitions.
Assuming tuition is $25,000, if you can attribute two additional enrolled students to the initiative and the cost of adding the lead magnet was $15,000, the ROI formula would be
$50,000 [minus] $15,000
[Divided by]
$15,000
That yields an ROI value of 2.33, which would be OK. To achieve the ROI benchmark of 5, the lead magnet would need to account for $90,000 in additional tuition (90,000-15,000=75,000÷15,000=5).
Looking at potential results through an ROI lens will often contradict conventional wisdom. I can’t tell you how many times I’ve heard someone consider a potential expenditure by saying, “If we just get two more enrollments, it will pay for itself.” But that doesn’t represent a prudent ROI approach because if all it does is pay for itself, you didn’t have to risk the investment in the first place. If you use the ROI approach, you will likely become more conservative in your spending or, hopefully, more ambitious in the results you expect.
One caveat about ROI – ROI isn’t demonstrated immediately. An initiative launched this year may bear fruit in two or three years. You may need to find ways to track data over time so you can retroactively calculate ROI.
Other benefits of tracking ROI
Management Presentations – Using ROI in your presentations to the Board and Committees will indicate that you are able and willing to use financial measures to gauge success. That may make Board members more comfortable and receptive to what you have to say. An ROI focus will also provide those in leadership roles with a perspective to evaluate and understand the importance of non-financial ratios and results, like pipeline data.
Levelling the Playing Field – An ROI analysis levels the playing field between schools with larger and smaller budgets. The ROI equation works regardless of the amount invested. If I spend $100,000 to net $150,000 (ROI 1.5), it’s less effective than spending $10,000 to net $30,000 (ROI 3). Success isn’t determined by a simple order of magnitude but rather by its proportionate results.
What about other measures of performance?
Focusing on ROI doesn’t mean you should ignore other indicators. Pipeline data, social media metrics and website analytics deliver important information about the effectiveness of your efforts. And they impact ROI results.
For example, the quality of a prospective parent’s tour experience impacts pipeline data ratios and ultimately results achieved. The same is true of a shadow day. Being able to demonstrate how each action and each experience contributes to ROI can be valuable to admissions and enrollment teams as well as leadership.
Other Success Measures—Some important marketing indicators are difficult or too costly for most schools to measure. Brand awareness, brand perception, and competitive advantage are examples of non-empirical factors that are important to marketing success.
A Final Caveat: Don’t Let ROI Constrain Creativity
The metrics of accountability can deter you from taking chances. If you are constantly concerned about ROI, you may choose to play it safe, limiting tactics to the tried and true – those that have proven to deliver results. But you’d be wrong for doing that. In fact, a study by McKinsey & Company found that the most creative companies are also the most financially successful. If anything, pursuing the path less travelled may yield better ROI.
Some ROI Tools and Resources
The ROI of School Marketing: Slides from a presentation I delivered that explains ROI
Hubspot: ROI Calculator – detailed templates to calculate ROI
Finalsite: How to Speak “Board” & Frame School Marketing as an Investment
Enrollment Management Association: The Independent School Cost-Per-Enrollment Study
ROI isn’t the be-all and end-all of decision-making, but it should be part of your toolkit. It can make decisions easier to make, analyze and defend- and give leadership a comfortable lens through which to assess success.
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Need help building a school-specific ROI framework or making sense of your data? Let’s talk. I’ve helped dozens of schools turn campaigns into clarity—and clarity into enrollment.
