You and ROI
ROI are three letters that marketers like to
talk about a lot. They stand for Return On Investment, which
loosely translates as the amount of money you get back for the
money you spend on advertising.
Simply put, if you spend £500 on a series of
adverts, how many phone calls do you want to receive from that?
If you were to spend £500 on a series of
adverts, how many sales do you need to make in order to get that
money back? How many more do you have to make to actually get a
profit out of it?
ROI is really simple basic stuff, but it is
shocking how many people don’t pay close enough attention to
What to consider
It can really pay off to sit down before you
do any marketing, break out the calculator and crunch some numbers
to check that what you’re planning isn’t just going to be a waste
First of all, work out what sort of customer
you are going to be generating from your advertising and what they
will be buying from you. If you are taking a very broad approach
with your advertising, then work out an average sale.
To ensure the best accuracy, then work out how
much of that sale is actually profit for you – if you are in the
business of selling goods for example, take away the stock costs to
leave you with actual profit.
Now put down how much your advertising is
actually going to cost.
You now have two figures – one of how much you
are going to spend and one of how much each customer will make you.
Now you just have to work out how many customers you have to get in
order for your marketing to be successful.
How do you make it work?
This is where you start introducing a little
bit of guess work to that equation above and where a little
experience and common sense might need to be employed.
If you have discovered that you need to
collect far more customers than your advert will even reach, then
you know that it definitely won’t work. You should also be wary if
the amount needed looks ambitiously high too – remember that not
everyone who sees your advert will instantly become your
Working out where your conversion rate is,
i.e. how many people will become your customer after viewing your
ad, will take a bit of time and might follow a couple of failures,
but you will get a good idea of what is and isn’t reasonable to
achieve and so long as your not spending money blind then you put
your business in a much better position.
Remain confident in your
Once you are armed with your numbers, costs
and potential revenue generation, make sure you are not swayed by
pushy ad-sales executives.
Whilst it is rare for an ad-sales executive to
lie to you about how well your ad will do outright, they can be
selective with the information they give you (for example out of
readership or circulation for a magazine, they’ll normally quote
whichever sounds better) and twist their own stats so they look
like a much better deal than they are.
Also, you will most likely have a better idea
of the best way to reach your clients, so don’t let yourself be
told otherwise if you don’t think one particular channel is right
for you. You’ve got numbers to back yourself up and just remember
that without a good return, you cannot afford to be throwing your