Every business should seek to maximise its return on investment. Shareholders demand it. ROI is important. So why does ‘ROI’ have such a bad reputation within marketing circles? Here’s why… Using ROI to decide HOW MUCH to invest in marketing is foolish/misguided/wrong etc. because the maximum ROI is always achieved by spending almost nothing!! This is because of the law of diminishing returns. Each additional dollar will give you a slightly lower return. But that doesn’t mean it isn’t still a great investment. In fact, you may need to invest more just to stay in business, depending on what your competitors are doing. So, never use ROI data to decide how MUCH to spend. However, once you have determined an appropriate marketing budget (e.g. enough to meet your growth objectives and/or to beat your competitors) ROI is your friend! It’s your duty to get the best return from your investment. And you should use data and research to make sure that you do. If you like my approach to illustrating useful concepts, check out my best-selling books: - The Smart Advertising Book: lnkd.in/eCMQAesc - The Smart Branding Book: lnkd.in/erMAGNVX - The Smart Marketing Book: lnkd.in/dhvxP_j or visit my website www.smartmarketing.me. #advertising #marketing #business #entrepreneurship #media #sales Andrew Tindall, Prof. dr. Koen Pauwels, Graham Staplehurst,
Right -- maximizing ROI is the same as maximizing profit if the 'i' (the investment or more realistically in marketing the expense) is a fixed value. But maximizing profit is the generic goal of a firm, not maximizing ROI, and so most marketers looking at ROI probably truly want maximum profits. I think most organizations would be better served to identify goals (conversions, sales, new clients acquired or what have you) and then minimize the budget required to achieve that goal -- but that requires an organization that is 1) able to decide what it needs from marketing and 2) is willing to accept "we can do more but don't hold the overspend against me" when the original plan needs adjustment.
Agree Dan, every marketers ultimate objective is to deliver ROI. The issue lies in how ROI is typically measured using things like last click attribution and/or expecting an immediate return. As with almost all investments the payback is typically over a longer period and for marketing should be measured using MMM! But the pursuit of ROI should always be goal!
Dan White what should be the KPIs for quantifying marketing ROI?
Insight | Analytics | Advisory
2moWhat is the most effective way of measuring marketing ROI Dan White?