ROI is the holy grail of marketing.
No, we don't think we are overstating this one, as it is the number 1 thing marketing people always talk about. "How can I prove that the money I am spending on marketing is generating results for the business?" is a question we hear time and time again.
However, what we often find when working with clients is that, surprisingly, the ROI on marketing is calculated all wrong. Here is the process we always talk about when it comes to goals and ROI.
1. Set ambitions and goals
It's no good doing marketing for marketing’s sake. And it’s certainly no good creating content for example - however good and well thought-out - until you know what you're trying to achieve with it.
So first off, you need to set yourself some numbers. This is where we usually see a lot of people make a big mistake. They set themselves goals such as, “let's grow 20% this year” without considering why they want to grow 20% and whether or not they really need to grow 20%. It’s imperative that you don’t just pluck a number out of thin air. So, let's do some real numbers; “we want to double our business in the next five years”, from there, let's work out how many new customers/sales that would translate to and off-set it with how many customers you are probably going to lose in that timeframe.
You need to frame your goals based on the number of customers you need to have in order to reach it, because what you're not doing is winning pound coins and pound notes, we are not playing the lottery here. What you're actually winning is customers. And that will lead you to thinking differently and onto point 2.
2. Understand the customer lifetime value
Once you've won some work out of somebody and once you've gained that new business as a customer, it doesn’t end there. Your goal will be to increase the spend of that customer with you over a period of time, thus increasing your return on the investment you made to gain that customer in the first place. It doesn’t make sense to spend all your money on marketing, but once you have your first sale with them you forget about them and move onto the next opportunity.
So, when considering the number of clients you need to have in order to reach your goal, you shouldn’t only consider their first sale with you, but instead their lifetime value to you, as well as consider how you are going to try and increase their sales when developing your marketing strategy. This makes them worth more to the business than just one single transaction and thus increases your return on investment in marketing activity.
3. Break the goals down
You then need to work out how many people you need to talk to in order to reach that number of customers that will get you to your end goal of doubling your business.
There are no hard and fast rules when it comes to conversions, everybody is different, even when they operate in the same industry. Some businesses can convert 1 in 2 leads and for some it’s 1 in 10. Whatever it is in your world and for your company, you need to know your average conversion rate. Once you know it, then you've got a fighting chance of actually making sense of numbers.
4. Rethink the sales funnel
Forget the sales funnel as you know it. The fact that it’s usually depicted with the wider end upwards is because the people who invented it – marketeers - want you to put money in the top of the funnel, so that somewhere along the line (with a bit of hope, good fortune and luck) some of the people you put at the top may drop out of the bottom. However, in a lot of cases, what you end up with is lots of them dropping out of the sides and never reaching the bottom. We often find that there are two big causes for this:
- Attracting the wrong people at the top of the funnel, because the business has identified the wrong target persona [link to target persona article] or hasn’t identified one at all for their marketing efforts. This results in you ending up talking to the wrong people, who won't give you good lifetime value.
- Forgetting to properly nurture your leads by following up the people who first had a conversation with you, either on your website, via email, in person or on the phone, and they haven't come back to you after this first interaction. You should persevere with showing them that you care about working with them. Not necessarily in a pushy way, but in a nurturing one, perhaps by sharing with them a piece of content that solves a pain point for them or suggesting a phone call to thrash out all their doubts and questions.
That is why we like to talk about the inverted sales funnel (see image below); putting clients at the top, and the people you need to attract and have conversations with at the bottom. If you focus on the clients you need to attract by thinking about who they are and what they do, from there, you can work out how you will nurture them up the funnel from being a stranger to becoming an opportunity and then resulting in a sale, your marketing efforts will be a lot more focussed and effective in attracting the right type of people. This inverted sales funnel can also help you better visualise how to set up your goals, based on our methodology of starting with the number of clients to convert first and working your way down to how many contacts you need to generate to reach the desired outcome.
5 – Consider the lead times
How long does it take from the first time you speak to somebody or they interact with your brand in any capacity, to when they purchase? Again, for every business this timeline is different and it’s important to know what yours is. It may be that some of the leads you generate in year 1 won’t convert into a sale until year 2, for example. So knowing that information will have a big impact on how you structure your goals and KPIs.
6 – Benchmark your sale close rate
The other metric that is important to know is your sales conversion rate of how many opportunities or proposals you need to convert a sale. This is particularly crucial in order to benchmark yourself, as if you manage to increase that conversion rate, even by 1% or 2%, that can have a major impact in your sales numbers often times much more than increasing the number of leads by 20% or 30%. In fact, if the sales conversion rate is low, we often advise to intervene there, before working on lead-generation activities, by either providing further training to the sales team, or creating closing content such as comparison sheets, videos, documentation, etc. to enable your prospects to make their minds up about you and your company faster.
7 - Pivoting
You need to remember that no matter how good you are today, it probably won't be good enough tomorrow, and you need to plan for that. You need to understand the extent of your market and the reasons it might change, and then what you can do to be more aligned to it. Or how you can open the pathway to a new market early in order to not to be caught by an increase of competition or shrinking in the market size. The best way to do that is to continuously learn, experiment and research, rather than settle. Sales and marketing are not just about learning what works best, but also learning what doesn’t work, or isn’t effective anymore. That is as valuable as a lesson as discovering a new great channel to market.
8 – Focus on positive customer experience
Do you know what the best way of knowing how well you are doing when it comes to your customer satisfaction is? Talking to them! Sometimes just picking up the phone and asking them how they’re doing is more effective than trying some convoluted technique that people nowadays like to concoct when it comes to customer satisfaction. And the reason why a positive customer experience is so important, is that it will increase their lifetime value. It has been proven time and time again that you’ll be more successful if you keep the customers you've got, rather than fuelling the marketing pipeline with shiny new leads.
9 – Focus on your remarkability
Going one step beyond customer service and customer satisfaction, we need to discuss remarkability. Remarkability is what people say about you, what they value in your offering and how you make them feel. We’ve written a whole article on “the 8 principles of remarkability” which you can read here. But how many people think you're remarkable right now? How many customers truly value you? It’s important to set some targets for how many of your customers you can consider advocates and really want to talk about you. How many of them would be willing to share how good you are and how much you helped them? Once you do this hard analysis, and set yourself targets for increasing this number, you can then plan on what you can do to make them talk about your remarkability.
So, whilst we think it’s important to always think about numbers - because without them all your marketing activity will be meaningless and unfocussed producing a lot of wastage - always keep in mind that the numbers aren't the ultimate goal. That should always be remarkability, value, understanding how you help customers and clients, and prospects buy from you, so you don't have to sell a market to them quite so hard.