What is a good marketing ROI?
Good results for ROI marketing start at a 5:1 ratio, and the very best marketing might net you up to 10:1. Meanwhile, ROIs below 2:1 haven’t netted you enough to continue. The cost of producing goods and delivering them to the public requires a higher ratio.
Exceptions to this rule include products with overhead costs of less than 50%. Products and services with low expenses can generate a profit at lower ratios. Consider industry-specific factors, including unique costs and margins.
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For example, if you achieve high ROI marketing but don’t make as much as your competitors, there’s a lot of room for improvement.
Challenges of marketing ROI
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Here are just a few challenges that can impact your marketing ROI.
Can be difficult to determine your marketing expenses
To achieve a high return on investment, you need to consider how to use your marketing. For example, product photography can garner interest and increase sales. However, spending too much on this one element can run you short in other areas.
On top of that, it’s often hard to tell how much you’re spending on marketing. Be sure to include all of the following elements:
- Time: How long did it take? The more time involved, the lower the marketing ROI.
- Production Costs: Include services, software costs, production and talent labor, and supplies, and all other costs to create the marketing campaign.
- Promotional Costs: This is the cost of promoting your product.
- Page Analytics: When you use tracking URLs, it’s easy to tell whether Facebook ad content drives traffic to a landing page.
- Non-Financial Returns: Consider estimating the value of responses on social media and other digital assets that help build brand awareness.
Over-reliance on short-term numbers
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A good business plan includes long-term and short-term benefits for marketing expenses. Focus on long-term rewards such as lead generation and brand awareness. Avoid the mistakes made by many rookie marketers.
Instead of addressing the immediate impact on your sales, consider all the things that can help drive lasting customer loyalty, which take months to build and years to cement. In short, you should align your metrics with the long-term goals of each campaign or program.
Measurements are too simple
Are you accounting for seasonal trends and other predictable changes in the market? In order to understand the true ROI of your marketing efforts, create a consistent sales margin to compare your results with.
For example, swimwear sales will largely depend on current weather conditions, while sales of a toy truck may remain consistent throughout the year with spikes during the holidays season. What external, consistent events are influencing your sales or lack thereof?
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