by Randall CraigFiled in: Blog, Business Development, CRM, Make It Happen Tipsheet, Sales, StrategyTagged as: Digital Strategy, Marketing, ROI, Sales, Trust Curve
How do you determine the ROI on your marketing and sales investments?
The standard formula is simple: divide the return, less investment, by the investment. A marketing campaign costs $1000, and reaches out to 1000 prospects. Five per cent of these respond, generating $1000 profit, for an ROI of zero: (1000-1000)/1000. If the profit is $1500, then ROI is 50 per cent, if profit is $500, then the ROI is negative.
Unfortunately, this calculation makes a fundamental error: what about the other 95 per cent that don’t respond? What can be done about them?
Traditional marketing suggests one solution: work to improve the conversion rate. An increase from five to six per cent flows directly to the bottom line – a 20% uptick! Yet making this change (which is important), only changes the question to what about the other 94 per cent?
So what about this group? Why did they choose not to transact? Three answers:
The real marketing question is about the 95%: what investment is your organization making to resolve these three questions? (The answer for many, is not much.) Yet a simple marketing automation concept – drip marketing – can change the equation, and close the gap.
Here’s how it works:
Once a drip marketing plan is in place, the ROI calculation can be made for the other 95 per cent – the only difference being that the time horizon is longer – sometimes several years.
How are you handling the other 95 per cent? This week, look at your marketing investment, and answer one question: is the investment split between marketing to the 5 vs 95 appropriate? If not, do something about it.
Marketing insight: Drip marketing yields an important additional benefit, even before the prospect commits to a purchase themselves: they’ll often refer you to others.
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