Everyone loves a good video, especially when it means that they don’t have to wade through pages of text in order to get the information that they need. There are tons of marketing studies to back up this claim.

Digital marketing professionals will tell you there’s nothing quite like a video for improving opt-in numbers, increasing lead generation, and boosting click-through rates.

However, as with most things in marketing, you must crunch the numbers in order to reveal the actual value of the material.

Professionally produced marketing materials are an investment in your company. Working out your costs versus the benefits you will receive helps you determine the level of resources that you can afford to invest in for your next explainer video.

It may not be as straightforward as calculating the return on a PPC campaign. However, it is still possible to calculate the ROI on an explainer video reasonably and accurately when you know what you are aiming for.

Tips for Calculating the ROI of an Explainer Video

Before you start working out the details of your explainer video, you should know what goals you want it to accomplish. Understanding your goals will help you to accurately calculate the ROI of an explainer video.

Set Your Goals

While it’s always good to keep an eye on your view counts, number of shares, and overall engagement, none of these figures will tell you how much your explainer video is worth in real dollars,

First, decide on a metric to assign to your explainer video. For example, do you want it to:

  • Generate more leads
  • Increase sales
  • Improve brand awareness
  • Educate your visitors

Educational and brand awareness is challenging to translate into dollar values. However, surveys and questionnaires can shed some light on how well your explainer video performs if these are your goals.

Calculate a Dollar Value

The figures discussed below will give you a value you can use to track your explainer videos performance versus your other marketing strategies.

Number of Sales:  You should not include the production costs in your ROI calculation. This figure refers to the gross margin rather than the profit because it will produce a more accurate ROI.

Number of Leads Generated: Tally up your closing ratio versus your leads. For example, if your video generates 1,000 new leads and you close on 200,  the closing ratio is 20%. Now all you need to do is multiply your closing ratio with the gross profit margin above, and you will have your figure for how much each new lead is worth to your business.

Calculating The Value of New Leads

A mobile app developer wants to increase the number of leads they sign up to trial their app. They have calculated a closing ratio of 20%. The app store takes a 30% cut of each sale, leaving the developer with a 70% profit margin.

The sale price of the app is $10, so the math will be:

  • 20% closing ratio x 70% profit margin on $10
  • 20% x $7.00 = $1.40
  • Each lead is worth $1.40

After posting an explainer video, the developer pulls in 12% more leads on the previous campaign’s results of 5,000. That equates to 600 new leads. Therefore, the explainer video has pulled in $840 worth of new leads.

Calculate the ROI of an Explainer Video

When you have the figures for how much each new lead is worth to your company, calculating the ROI on an explainer video is as simple as deducting the production costs from your figures.

Professionally developed and edited explainer videos can help your brand stand out by delivering critical information in an engaging, entertaining, and memorable way. The excellent news is that explainer videos are more affordable than ever, so get your quote today and start generating more leads for your business.