A Numbers Game
Telling marketers that they must track and work toward ROI can be dangerous. But it may be more dangerous to ignore the issue. It won't go away. And job security -- maybe even company survival -- depends on it.
In expanding economies, management is more than happy to spend money on marketing ideas. Money flows freely, and branding, presence building, and influencing public perception are considered important activities.
In a down economy, however, all of that changes. Management focuses on sales and return on investment (ROI). All of the “pretty” components of marketing go away, and marketers suddenly need to justify their existence.
So, with the Internet economy slowing down, one of the first places companies are looking to make cuts is the marketing department. Luckily for online marketers, there has never been a medium more capable than the Internet of delivering ROI. Unfortunately, most marketers do not understand how to show online ROI or, in some cases, how to achieve it.
Monitor, Track, Target
With ROI becoming essential for marketers, monitoring every dollar spent for marketing activities is also becoming essential. Over the last six years of marketing, I have developed monitoring systems — spreadsheets — that are focused totally on ROI: how many leads I receive from a certain activity, how many of those leads turn into sales, and how many dollars are added to the bottom line from that activity.
The same can be done with offline activities such as trade shows and direct mail campaigns, but determining where a lead actually came from can sometimes be cumbersome in those cases.
In the online world, however, this type of monitoring is relatively simple. With current technology, it is quite easy to track when visitors click on a link, where they go once they click on it, and the things they do once they get there. Determining where visitors came from and what activity generated the lead is usually straightforward.
Marketers should use this technology to best advantage, monitoring and tracking systematically and religiously. If you systematically track your marketing activities, you will learn to pattern your activities to those actions that are producing the greatest ROI. This may be common sense, but many marketers are not doing it.
Getting the Right Ratios
The other challenge that arises from tracking and monitoring marketing activities is determining what should be successful ratios. What is true marketing success differs from business model to business model, but I try to use a few rules of thumb:
- If you are utilizing a direct sales model, for every dollar that is spent on marketing activities, eight dollars should be returned in revenue — an 8-to-1 ratio. The numbers will, of course, vary, depending on what you are selling and the other costs of goods sold.
- Activities resulting in a ratio of less than 2-to-1 should be eliminated, or completely revised, as quickly as possible.
- Branding and image building is still important, but measurable ROI should still be achieved for any marketing activity, especially online marketing.
Telling marketers that they must track and work toward ROI can sometimes be dangerous. Many disagree that all marketing should be based on direct ROI. But in an economy turning downward, ROI is quintessential. Job security, and in some cases company survival, depend on it. The good news is that almost all online marketing activities can be tracked and monitored. It just takes some preparation and know-how to establish a system.
Effective online marketing demands this type of diligence. Preparation and attention to detail can make you an online marketing hero.
