R.O.I or Return on Investment is defined by Wikipedia as:
Return on investment (ROI) is the benefit to an investor resulting from an investment of some resource. A high ROI means the investment gains compare favourably to investment cost. As a performance measure, ROI is used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. In purely economic terms, it is one way of considering profits in relation to capital invested.
That’s great and all – but what does it actually mean?! And in relation to marketing, does the same explanation apply? And more to the point, how do you work it out? That’s what I am hoping to address right here, right now.
First things first..
Let’s start with a fairly simple explanation of R.O.I or Return on Investment using an example. Something we’re all familiar with is housing. Everybody wants to buy one, not everyone is lucky enough to do it, but for those who do the ultimate aim – regardless of what people say – is making a big chunk of change from it when they sell it.
When you do sell it, you’ll be left either feeling pretty chuffed or you might have a bad taste in your mouth. Essentially that depends on how much you’ve got left after you deduct what you paid for it. If it’s positive, you got good R.O.I and if you’ve got a negative number, you guessed it, that’s a bad return.
Now, of course, nothing is ever quite that simple. You would need to take into account the length of time that you’ve owned the property and the costs of any improvement or maintenance work done over the time period to get a totally true R.O.I, but most people forget all that stuff and only remember the big numbers.
If we look back to the second question asked at the top – in relation to marketing, does the same explanation apply? – the answer is a pretty loud NO.
And in terms of Marketing
You see, the big difference between the two is that when we look at the first example, the investment resulted in an asset. Most cases of R.O.I, when an asset is involved, allow the person who holds it, to sit on it if they wish. They can judge the market for when they think the best R.O.I can be achieved and then cash in.
When we look at marketing, your investment is spent the moment you decide to do any activity. You set the clock ticking on the R.O.I calculator the moment your marketing hits the public and in the worst possible cases, if it never gets to see the light of day, you’ll be faced with negative R.O.I from the outset.
The trick with getting great Return on Investment or R.O.I in marketing is to make sure you’ve done some homework, and that you’re putting your investment into something that can be measured.
It’s all about the measuring
For instance, taking your hard earned cash and putting it into a big billboard can give you instant return, in that you’ve paid some money and you’ve got a billboard for all to see. Now the question, how do you know if people are looking at it and if they are that they’re doing something as a result. Yeah, most people can’t answer that question. This makes it pretty difficult to know if you’re getting a return as a result of the billboard. It could just as easily be word of mouth or maybe you’ve got a company vehicle with your name on it. So how do you know if it worked or if you should do it again? In most cases, you don’t and it gets put under the cover all banner ‘Brand Marketing’. It’s worth pointing out that there are ways to track the activity of people who might be getting in touch as a result of seeing the billboard, but more of that later.
If R.O.I is your focus for your marketing activities, and it should be!, the simplest way to test your market for success using your images, brand and product messaging and offers is through Digital Marketing. It has some of the lowest entry costs, is in most cases totally trackable and you can test everything (marketers call it a/b testing). Plus the R.O.I tends to be one of the highest since you can validate it.
Providers like Google and Facebook have changed the way in which you can get your message to your potential and existing customers. The options are almost endless and they can be switched on and off as the market shifts. No more getting your ad in a paper directory (yes they still print these and yes people are still paying to be in them) only to change something and the ad be useless 5 minutes after it was printed.
What’s the catch?
However, like everything, there is an element of skill required to make sure that you’re making the best decisions when using these providers. Just like the billboard, if you get digital wrong you could end up being forced to call it ‘an experiment’ or worse, right the investment off.
Aside from setting it all up right, tracking it to calculate the end result can be a work of art too. If only there was a way to get something or someone to do all this for you. I’ve got great news! There is.
Here’s where knowing us helps
Through recommendations, notifications and market monitoring Grow Digital Marketing offers up suggestions to make sure that your marketing dollars are always performing to the best of their ability. It tracks all the current campaigns you have in the market for R.O.I and makes suggestions for improvement, should they be needed.
To further compliment this, Grow Digital Marketing can track your competitors and rank your digital presence against theirs. Plus it’ll feed in their social activity so you can keep an eye on what they’re doing.
It gets better
The software is just the start. Grow Digital Marketing has a team of experts that provide the services to get your business growing. From Google and Facebook campaign management through to website creation and video and photography, they’ve got you covered.
So you could open up an excel spreadsheet and try to input a bunch of formulas that look like pig latin or you could try Grow Digital Marketing. It’s free to get started and within just a few clicks you’ll have an idea of the size of your potential market plus the R.O.I of your current activity and how that stacks up to the industry average.
I know what I’d rather do. What about you?
Oh and for those wondering how to make a billboard trackable, ask our team about call tracking and vanity URL’s. It’s all very technical, but if you use those two things on the billboard and nowhere else, you’ll stand a chance at being able to track it inside Grow Digital Marketing.