WTF is the ROI of online marketing?

22 replies
Get this question from clients all the time.

What do YOU say?
#marketing #online #roi #wtf
  • Profile picture of the author DURABLEOILCOM
    The clients want to know what kind of Profits are possible by hiring you for X amount of money.
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  • Profile picture of the author pogospring
    Money spent on digital campaign = x
    Turnover generated from campaign = y
    Processing costs = z

    ((y - z) / x ) * 100 = ROI

    So if you spent $1000 on an Adwords campaign that generated $2500 of sales, that in turn cost you $1000 to process (cost of goods, processing, delivery costs etc) you would have an ROI of 150%.

    ((2500 - 1000) / 1000) * 100 = 150
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    • Profile picture of the author pogospring
      Let the numbers do the talking. I would refer to successful campaigns you have run for other clients. If I know I'm going to make a positive return I have no problem spending on a campaign.
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      • Profile picture of the author luketr
        I would refer to successful campaigns you have run for other clients. If I know I'm going to make a positive return I have no problem spending on a campaign.
        That's the best you can do unless you have enough experience in that exact market to make a more accurate guestimate. Just be sure not to make any promises. Unless all conversion is done online or you have sufficient tracking in place to credit customers who convert in a period of time after first arriving from your marketing, there are too many factors outside of your control to calculate the figure exactly.
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        • Profile picture of the author rts2271
          ROI - Return of Investment
          Cost - Expenses = ROI

          I would point out if you don't know your ROI you don't have a business, you have a hobby. You also have to be able to identify all the entities inside the channel.
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  • Profile picture of the author extrememan
    ROI means "Return of Investment". So for example. Someone buys a solo ad to drive traffic to a squeeze, than the return of investment kicks in to find out how many sales is generated after the solo ad is spent. ROI is extremely important because knowing your numbers helps massively to scale up a business online.
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  • Profile picture of the author Jaylocker
    ROI = Return On Investment

    This refers to the amount of money that you have spent on advertising / Building a Product versus how much money you have returned.

    If you spend £1000 but you get back £5000 then you have an ROI of 500%

    ie you made back 5 times more than you spent.

    So if I'm a client and I come to you and you are charging me $1000, as the client, I want to know what sort of return your service will deliver for me, so that I can decide if I should place that $1000 with you, or if I should place that $1000 with another source.

    Make sense?
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  • Profile picture of the author JohnMcCabe
    Originally Posted by echidna View Post

    Get this question from clients all the time.

    What do YOU say?
    There are actually two ROIs you can address, and most small business owners worry about them in order.

    1. Return Of Investment

    How soon will I get my investment back? Will I get it back? What could go wrong, and how likely is that to happen?

    2. Return On Investment

    Once I have my investment back, how much more will I make?

    This is what the previous posters addressed.

    Addressing these with clients is an educational process. The best way I found to handle it is by having before/after case studies from your own business. You may not have to name names, as most owners will understand confidentiality.

    If you can honestly tell them that you worked with a similar business and you got such-and-such results, they now have something to compare hiring you to their other alternatives.
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    • Profile picture of the author Jeff Schuman
      Sadly for most Internet marketers the ROI is a negative number because they do not learn Internet marketing skills before they invest their time and money.
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  • Profile picture of the author Jason Kanigan
    So some ideas for discussion here...

    ...if a prospect is so "out of it" that they don't understand how online marketing works, is it worth the struggle to "convince" them of its value? Or are their better prospects to go uncover?

    (A couple simple questions up front: "Have you done any online marketing before? ...Any marketing at all? How did that go?" Tells you right quick how much experience this person has with marketing and what their understanding, prejudices and expectations are.)

    ...why haven't you spun the question back to the asker? "I've found that different people have different definitions of words. This leads to situations where two people think they're talking about the same thing, but they really aren't. So, what's your definition of ROI?"

    ...the truth is, you can't know what an ROI of your efforts will be for a specific business--unless you're already an expert in that business.

    You don't know their Lifetime Customer Value.

    You don't know their Customer Acquisition Cost.

    You don't know their cash flow situation, opportunity costs, or much else at the start.

    So ask.

    You have to build these figures with the participation of the prospect; you can't pull them out of the air (well I guess you can, but guys like me will laugh you out the door.)

    "Ms. Prospect, I understand you want to completely grasp what doing whatever I recommend will accomplish for your business. Let me be honest: I'm not an expert in your business. If I were, I'd be your competitor instead of your advisor.

    "But I am an expert at online marketing. And that means attracting and converting new customers through different sources than ways like direct mail and newspaper ads. Can we go through just a few questions, so we can build these answers, and the answer to your ROI question?"

    Anyone who won't go along with that is a jerk. And do you want to spend your time with time-wasting jerks?

    Didn't think so.

    See, it's not enough to have some sort of technical skill to be in business. You also have to know how to sell.
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  • Profile picture of the author Marc Rodill
    Lol most of the responses are explaining what ROI means. I think we're past that for this guy. Or at least I hope so. He's already got clients. It would be helpful to know what you sell, because specifics matter.

    Generally speaking...

    OP - I can't promise results, obviously. As with any business endeavor, there are a lot of different factors at play. Your cost structure, timing, the current conditions of the market place, and situations and elements that are beyond our control. So I can't guarantee you that we'll hit it out of the park every single time. That's nonsense. Never trust anyone who insults your intelligence like that. But here's what I can promise you... [go into what you can actually guarantee them if it doesn't work]. Additionally - direct them to previous client case studies of actual results.

    Like Jason alluded to...

    It sounds like these clients are marketing dingbats, because how could they possibly expect you to guarantee a ROI without first testing what that ROI actually turns out to be, based on experience?

    Of course, everyone wants guaranteed results. So it's probably also a test question. Maybe what they are really asking you is something else entirely, like, "So do you have any testimonials from clients you've had successful experiences with?" or "Are you going to tell me what I want to hear, just to get my business?"

    Just be honest.
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    • Profile picture of the author discrat
      As others have alluded to it seems bizarre how or why someone would ask you the ROI in IM. Kind of like saying what is the ROI of selling cars.


      Way too general. Ferrari dealerships and Volkswagen dealerships I would imagine might have different ROIs.

      Just depends upon the specific products within the Online business World



      - Robert Andrew
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    • Profile picture of the author JohnMcCabe
      Originally Posted by Marc Rodill View Post

      Of course, everyone wants guaranteed results. So it's probably also a test question. Maybe what they are really asking you is something else entirely, like, "So do you have any testimonials from clients you've had successful experiences with?" or "Are you going to tell me what I want to hear, just to get my business?"
      Marc, you might have something there.

      They may be asking "are you for real, or will you tell me anything to get in my checkbook?"

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  • Profile picture of the author Marc Rodill
    Thanks, John. And you should definitely start off with Jason's questions first to qualify these people out. If they get past his questions then that's great. If they don't, it might be a great idea to cut them loose. I've been reading up about Jason a lot lately, even after not really liking him at first. Then I realized that's the point. He doesn't really care if you like him or not. And that position is more than what initially appears to be a personality trait. He uses it to close more sales and make money. All of us can take that lesson to the bank. So after stalking his posts and reading more, my conclusion is that he's a sales genius. So do what he says.
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  • Profile picture of the author Steve B
    Originally Posted by echidna View Post

    Get this question from clients all the time.

    So what have you been telling them?

    You've had clients who are looking to you to provide online marketing; surely you have developed some type of benefits statement that you use to express why you should be hired and what specifically you can do for your clients.

    Formulas and percentages are fine, but they are not the end all of online marketing. Sometimes small businesses want to put marketing strategies in place, set up funnels, initiate branding campaigns, develop promotions and sales materials, yada, yada, yada. There are lots of aspects to online marketing that don't include outcomes and solutions that can be defined by the dollars and cents of ROI.

    When you've been in this business long enough to understand that marketing is more than just pounding out offers and collecting sales, you will have an appreciation for the importance of all the non-numbers details that go into effectively promoting a business.

    Steve
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    • Profile picture of the author Frank Donovan
      Originally Posted by echidna View Post

      Get this question from clients all the time.

      What do YOU say?
      Originally Posted by Steve B View Post

      So what have you been telling them?

      You've had clients who are looking to you to provide online marketing; surely you have developed some type of benefits statement that you use to express why you should be hired and what specifically you can do for your clients.
      Just what I was thinking. How do even get clients when you don't know how to answer that question?

      .
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  • Profile picture of the author Marc Rodill
    By the way, if you get this objection all the time and you're struggling with how best to handle it, then you should look up Jason's video on this forum called Eat That Frog.
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  • Profile picture of the author Steve L
    Originally Posted by echidna View Post

    Get this question from clients all the time.

    What do YOU say?
    It's different for every business, but you could simply ask when the last time they used the yellow pages or newspaper classifieds to find a business to patronize. I think most business owners these days understand they can't ignore the web. It was a harder sell back in the 90s and early 2000's but most businesses have come around.
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  • Profile picture of the author yukon
    Banned
    The other 87% of the worlds population would have simply done a Google search. The definition isn't complicated.
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    Hi
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  • Profile picture of the author DRP
    Originally Posted by echidna View Post

    Get this question from clients all the time.

    What do YOU say?
    Seriously? If you can't answer this question for your "clients" (marks), then you are NOT QUALIFIED to be serving them.
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    I'd rather tell you an ugly truth than a pretty lie.
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  • Profile picture of the author Regional Warrior
    Originally Posted by echidna View Post

    Get this question from clients all the time.

    What do YOU say?
    If they asked you this and you are in QLD = tight arse so stay far away
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  • Profile picture of the author CandyKc
    ROI = (Additional Profit From Marketing - Cost of Marketing)/Cost Of Marketing. Where Additional profit From marketing = Revenue from marketing - Variable costs of that marketing
    And where Variable costs of that marketing = Revenue x Contribution Margin or Revenue - variable costs
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