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Generating ROI: The other 95%

by Randall Craig on May 31, 2013

Filed in: Blog, Business Development, CRM, Make It Happen Tipsheet, Strategy

Tagged as: , , , ,

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. 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:

  1. They didn’t have a strong enough relationship with you yet.
  2. They didn’t know enough about your service or product.
  3. They weren’t ready to purchase at the precise time that you were ready to sell.

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:

  1. Identify all of the “funnel” entry points. Examples include web lead generation forms, trade shows, networking meetings, or even telemarketing campaigns.  Any source where a prospective client identifies as having an interest.
  2. For each source, identify 12 no-cost, high-value items that both educate and help solve critical problems. These can include white papers, infographics, videos, webinars, and books (real and electronic).
  3. Every 60 days, send one of these items to the prospect. This helps educate them, improves their trust in your organization, and most importantly, keeps your name in front of them. When they are ready to buy, they’ll think of you first. (Of course, doing this assumes that you have permission to reach out – if you don’t, the unsolicited interruption may have the opposite effect.)

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.

This week’s action plan: 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.

Looking for more?

  • If you are interested in observing how I use drip marketing, reach out to me, and I will add you to a specific drip marketing sequence. Each month or so, I will send out a value-added white paper or other resources. As you receive them, notice that there is never ANY sales pitch or “marketing” brochure.
  • My team actually implements these systems; if you’re interested in a behind-the-scenes demo of any of these software platforms, just reach out.

Note: The Make It Happen Tipsheet is also available by email. Go to www.RandallCraig.com to register.

PS:  My firm publishes a monthly compilation of resources, event invitations, and other news:  the one-o-eight.  To subscribe, fill in the form here.

Randall Craig

@RandallCraig (follow me)
www.RandallCraig.com
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About 

Randall has been advising on Web and Social Strategy since 1994 when he put the Toronto Star online, the Globe and Mail's GlobeInvestor/Globefund, several financial institutions, and about 100+ other major organizations. He is the author of seven books, including the recently released "Everything Guide to Starting an Online Business", and speaks across North America on Social Media and Web Strategy. More at randallcraig.com and 108ideaspace.com.

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