Death to ROI: Rethinking Your Marketing Strategy

This blog was originally posted by GrassRootsMarketing.
Marketing is all about results. At the end of the day, the whole point of marketing is to drive sales, right? If your company isn’t getting sales, then your marketing strategy isn’t working.

Consequently, marketers are taught to focus on ROI, or return on investment. The thinking goes, if you’re spending x amount of dollars on your marketing campaign, and you get y amount of dollars in sales back, then you can calculate your ROI. If you’re looking for the official equation: ROI = [Gain from investment – Cost of investment] / Cost if investment

If you’re a business owner, you’ve probably asked for your team to calculate the ROI of your marketing program. You want to know the effectiveness of your investment. If you’re an employee, chances are you’ve heard your boss say, “How much is this going to cost me? What am I going to get back? What’s the ROI?”

In a simple world, ROI is a fantastic measure. We could just simply calculate the marketing methods that provide us with the highest ROI and invest more money into those tactics. Then, we could cut out the methods that yield the lowest ROI and invest that money elsewhere.

We don’t live in a simple world.

It used to take between 3-5 marketing “touches” to obtain a customer. Example: an individual visits your website (marketing touch #1), he/she receives your quarterly newsletter (marketing touch #2), and then a salesperson would make a follow-up call to close the deal (marketing touch #3).

Studies show that now it typically takes anywhere from 12-25 marketing “touches” to get that customer. In today’s economy, people tend to drag their feet when making a buying decision. It can take months, or even years, for an individual to make a purchasing decision. Your target audience now goes through a journey before making a final choice, and a lot of factors go into the decision making process.

Since so many marketing “touches” influence your audience’s purchasing decision, it’s becoming more difficult to accurately calculate the ROI of your marketing tactics. Sure, you can look at things in terms of your entire marketing budget vs. sales, but it becomes challenging to measure the specific tactics.

I say, death to ROI! Instead, we focus on a new measure: ROO, or return on objective.

For example, let’s say you have a stellar website. One of the main objectives of your website is to generate new leads, and the goal for your small business website is to get 10 qualified leads per month. In August, your website gets you 100 new qualified leads. Therefore, your website had a high ROO for August.

Now, you may counter that with, “What if none of those website leads convert to sales? Isn’t the ROI on my website zero?”

Fair point. However, I would argue that you have to look at things more holistically. Does your marketing program include any follow-up for those website leads. What happens after someone fills out a form on your website? Does your salesperson give them a ring? Are they included in a newsletter or e-mail campaign providing them with more information? Or does the buck just stop there?

You can’t blame your website if there’s no follow-up process! Or, let’s look at this alternative. Your salesperson sends a proposal out to a lead from your website. In a rush, the salesperson includes seven typos in the proposal and miscalculates your fees. The lead declines your business as a result. Again, is this your website’s fault? Nope!

Is death to ROI a dramatized statement to make? Absolutely. Analytics and measurement are critical to any marketing program. However, by looking at things from an ROO perspective, you’re forced to take a closer look at the effectiveness of all your marketing methods and how well your tactics work with one another.