Return on Investment.
Yep, that’s the only acronym small business owners need to know. Especially if you’re looking into digital marketing strategies.
I could end this blog post there – I mean, I’ve given you the answer to the (almost) clickbait headline. But, instead I’m going to go a step further and explain why ROI is the single most important marketing acronym you need to know.
So, what even IS return on investment?
When you start a new digital marketing plan, chances are you’re going to have some initial outlay costs. Your return on investment is an estimate of how much money you’ll make in return for these costs.
For example, if you’re investing $5,000 in a new website, you need to figure out how many people that visit that website are likely to convert into customers and how much each of those customers is worth to your business – in terms of how much they’re going to spend on your services.
So, your website cost $5,000 to build and get live, and you’re expecting 500 visitors per month, of which 10 are likely to become customers (with each expected to spend over $500 on your business/service) – you have effectively paid for your investment in the website in the first month, plus added an extra $5,000 to your businesses revenue for the future months – giving you a pretty damn good return on your investment.
Here are some much more in-depth explanations on calculating your ROI (because I’m numerically impaired it’s hard for me to explain the numbers!):
Now you’re probably thinking:
“Okay, Rhiannon, I get it… Why do I really need to know about it, though? Can’t I just take my agencies word for it?”
If you don’t know your ROI you could be wasting your money
As a small business owner, I know that you’re always thinking about money. Don’t be ashamed – we all do it. Whether it’s money coming in, or money going out it’s always at the forefront of your mind. And with good reason. It’s the lifeblood of any business.
That’s why measuring your ROI in marketing (sometimes called the ROMI: Return on Marketing Investment) is so important. You don’t want to be throwing money at something and not knowing how that money is performing.
You wouldn’t just invest in a property and say “yep, that’s fine…” and never look at it again. You’d think about where you’re investing, what the market conditions are and what your returns would look like. The same goes for marketing – you need to know your returns, and whether a particular form of marketing is performing well enough to make it a viable option for your business.
It helps you choose the right marketing tactic/s for your business
Knowing your ROI for your various digital marketing tactics will help you choose where to spend your time/money for the best returns. If social media isn’t actually performing that well for you based on your returns, you know that you can dial back the time/money spent on that platform and put it into something else that is working for you.
Instead of just trying all of the digital marketing tactics (do you really need six social accounts, two blogs, Google ads, Facebook ads, email marketing, white papers etc etc etc??), when you know the ROI of each, you can spend your time doing the things that really count instead of wasting your or your agency’s time and money.
There are limitations to this though (just like Fat Guy Media mentions in this article). Digital marketing isn’t a magical solution that instantly garners results for your business – it is trial and error. Even if a tactic isn’t performing as you expected within the first month, don’t just scrap it completely. Fine tune, engage with your audience and see where you can improve before eliminating it. ROI is a good indicator of success, though, and when the numbers get too dismal to handle – consider a change.
So, when you’re looking at engaging some external help to get you going with digital marketing, ask yourself (and your expert):
“What’s the ROI?”