What You Measure Matters.

Managing the ROI Police and Improper Benchmarking.?

ROI (return on investment) and marketing are never-ending discussions that drive both business owners and agencies grey. Many business owners rely on agencies to drive sales and manage the business's marketing. Because business owners are often busy, marketing tasks can be reduced to mere checkboxes and scheduled meetings where they receive metric reports that are difficult to understand. The problem is that the numbers provided during these meetings are often self-serving rather than truly meaningful.?

Most businesses have become blinded by the desire to see a clear ROI on their marketing and, because of this, become hyper-focused on only executing marketing that provides a clear data report at the end of the month or quarter. The issue with this is that metric-focused marketing tends to be the end-of-funnel efforts, which cost the business more and are less effective. Because the marketing is only focused on SEO, Google Adwords and Meta, you’re often barely scraping by and have no budget or bandwidth to test initiatives that will grow your brand. The best marketing can’t be measured by a data report alone. Sales matters, but so does your brand's reputation in the customer's mind.??

It's important to remember that marketing happens in a funnel and that the entire funnel matters when looking to make a sale.?

When someone is ready to act, Google Ads and most Meta Ad benchmarks are positioned at the bottom of the funnel, where conversions typically take place. Many business owners are so busy and overwhelmed with day-to-day operations that they expect their customers to simply see their brand, service, or product, click on it, and make a purchase.

Marketing is an investment; it's not a guarantee– and you have to invest smart to make the most of it. To see the returns, you have to invest in the process; looking for just a sale is a transaction. The difference between an investment and a transaction matters. Like all investments, risk and invested time are required to get the most out of your dollars. This is why John Wanamaker's quote from over 100 years ago is still relevant today, “Half the money I spend on advertising is wasted; the trouble is I don't know which half.” Some of your investments pan out, some don’t. You still have to take the risk to get the return, and you have to diversify your portfolio to find the option that works for you.?

ROI in Marketing–Stop the Policing to Grow.

ROI in marketing matters, but you have to set clear benchmarks for what’s reasonable and, bluntly, what’s necessary for your business to survive.?

The reality is that marketing is expensive. No matter how much you spend, any money spent on your business is, and should be, highly scrutinized. It hurts to spend in the unknown, especially when you can’t clearly understand what you will get from the spend.

Most business owners understand that paying for marketing is an investment in the future but want to clearly understand how much the investment will make them from the outset before they decide to spend any hard-earned cash. The number one question I get is, “How much money will my investment make me, and can you guarantee results?”?

Over-fixating on ROI is a major issue that stops good ideas from getting past the finish line. The issue of ROI impacts businesses differently, and it often focuses on business size. For small businesses, a lack of clarity on ROI stops them from growing and getting exposure in the market. For medium to big-size companies, their issue tends to be over-fixating on marketing budgets and missing out on strong opportunities because they can’t commit unless there's a clear and tangible ROI.?

In theory, your marketing should make your business money or at least not cost you money, but thinking only about ROI is flawed. The problem with ROI-focused marketing is that the only initiatives that get approved are those with clear metrics, and the opportunities with clear metrics aren’t always the most effective.?

On one hand, to grow, you have to test and evolve. Your brand needs to be in the market to get exposure and stay top of mind. You have to be prepared to spend money to:?

1. Make money
2. Learn what works and what doesn’t work for your brand.*?

*It's important to note that testing should be done with an expert and within your budget.?

Most of you reading this probably don’t know how much you should spend on marketing or how much of your business actually comes from marketing.?

How Much Should I Spend on Marketing Anyway??

If you are an established business, 10-15% of your gross revenues should be spent on marketing. This includes both labour, ad spend and any other additional costs that fall into the market category (i.e. marketing materials, conferences, swag, agencies, etc.).?

If you are a new business entering the market, you must spend a bit more because you don’t have the benefit of repetition and exposure. For new businesses, you should project to spend 20-25% of projected gross revenue on marketing (Note: this also includes labour, ad spend and any other additional costs that fall into the market category).?

In many industries, the sale happens before the sale (the buyer decides to convert with you before the physical transaction happens). This is why it's so important to have an effective brand. Marketing that converts begins with brand awareness, which is an important and difficult moment to measure. This is where the problem of ROI comes into play.?

Branding is the idea or position a company holds in your mind. It takes many times to hear and experience the brand for the name and the association to the product or service to stick. In fact, it takes at least 7 times, and it’s called the rule of 7.?

The Rule of Seven.

The Rule of 7 is a marketing principle that suggests that customers need to see a brand at least 7 times before making a purchase decision. This is where ROI-focused thinking becomes complicated and flawed. Branding is quite similar to dating. There is a build-up period where the customer is exposed to the product or service. Like dating, it takes a few times to see the product/service to decide if it's the right fit. On these dates, you hear different sales lines or points of difference. Where did your date go to school, what were their interests, how did they dress, and what kind of music did they listen to? All of these data points either align or misalign and once you’ve received enough information, you decide whether or not you are going to convert.?

At no point does the customer tell you which of the 7 moments drove them to buy– and based on your data, you can only really measure the last data point. In fact, it's often the entire experience because people buy from brands. Using ROI alone as a guide to decide how to brand and market your business can hold your brand back because it takes more than just 1 ad to decide if your business is the right option for the customer's needs. This is where ROI-focused thinking can hold your business back. Most business owners look at marketing in a vacuum; they only want to invest in what they can get a data report from– the problem is you can’t get a data report from the experience your brand offered to your customer holistically and why they decided to convert– or more likely, not convert. Focusing on the numbers alone and using this as your guide to decide whether to focus on your brand or not can hold your business back.?

We worked with a client in the flooring space; they were a big company but not the category leader. Their company hired us as strategic consultants to dig deep into their business and create an audit and marketing plan for them to follow. The company was crippled by fear of losing leads– they were a lead business, and their entire company lived or died based on the number of calls the company received monthly. Their marketing budget was massive for the company's size, but because they feared losing leads, the only areas they spent money on had to result in a clear data report showing the number of leads retained for every dollar spent.

This broken approach resulted in a marketing cash BBQ and the company being sold on efforts that weren’t effective for their business. A large portion of their budget went to Google AdWords and Meta. They were spending nearly $80 for a click on their ads. They were getting leads, but they were barely scraping by. Their tunnel-vision approach to ROI resulted in one of the worst ROI multiples I've ever seen in digital.?

They only spent on the bottom of the sales funnel by focusing on ads. There was no focus on brand awareness and sharing their unique differences as a brand because there was no way to track the effectiveness of brand awareness. By looking only at conversion metrics, the brand wasn’t communicating important selling points like:?

• Having the best warranty in the market
• Being the oldest company in its category
• Having the best technology?
• Being completely customizable by colour, shape and size
• Communicating they were family-owned and multi-generation
• Speaking to the reality that they are trustworthy, credible and the best company for the job.

The brand couldn’t understand diversifying their marketing spending into areas that didn't provide a clear report for the clicks and conversions they received. Focusing on campaigns with a ‘brand awareness’ metric felt too risky for the brand, and they couldn’t get behind the idea. The problem with this thinking is that they couldn’t afford to continue with the spending rate they were operating at. Numbers one and two in their category were huge companies with 5x their budget. Huge industry leaders typically have a line serial dedicated to driving up their click rate so that their flawed approach would be ineffective. Companies in the number 1 and 2 positions can afford to waste cash because they must spend everywhere to keep their throne. Brands in seat 4 onwards must be more strategic and change their approach to ROI to win for less.

ROI policing stops good ideas that separate your brand from the rest. Your brand has to stand out and connect with new audiences in multiple ways for the end-of-funnel investments to convert. If you only invest in the bottom of the funnel, you will pay more for leads and lose more business. This is not a scare tactic but a fact.?

My takeaway, look at how you're spending your marketing dollars. Are you fixated on getting a tangible report showing what your marketing got you last quarter? If so, you are probably overspending and missing out on other opportunities that would be more effective for your business but harder to measure.?

Thanks for reading!

Camille