27 March 2012 | Team Tamar

Are you getting ROI or an RO’Lie’?

As we move into the next quarter and for some, financial year,  I expect many brands will be looking at their digital channels and questioning whether or not they’re getting the best ROI? I get it, you need to know ROI but it’s the  most overused figure in business and arguably the most misleading! Make no mistake, I’m on the ROI bus but I’m always mindful of a few caveats:

1.       Don’t be seduced. ROI should be targets and not promises. Even the more scientific of digital channels can’t guarantee ROI numbers. For this reason they should be realistic. It’s very easy for someone to write down a number and use it as a tool to justify more spend but ‘if it’s too good to be true…’.

2.       Bigger doesn’t mean better. I have seen on many occasions a larger revenue figure get usurped by a larger ROI.  For example, I had an instance recently when the ROI was 18.5x to deliver £1.35m OR an ROI of 17x to deliver £3.7m. Despite the fact we’re talking about almost tripling the revenue, the focus was still the ROI and the question was “why pay more when we can get a better ROI as we are?”. REVENUE is the key number here.

3.       The scales of ROI are complex i.e. if you halved the spend it’s likely the ROI won’t simply halve, similarly if you doubled it. The likelihood is that you’re not going to go for the first cost (and therefore ROI) that you’re presented with so when you negotiate your costs, don’t forget that the ROI algorithm will spit out something completely left field. There are online ROI calculators but I’m sceptical.

4.       Don’t translate ROI literally. Tamar achieve an average ROI of 18x for integrated SEO and Social campaigns but that doesn’t literally mean if you gave me £1 I could get you £18 back. (If I could I probably wouldn’t be writing this blog, I’d be on a yacht in St Tropez) there are minimum thresholds, as there are maximum thresholds or saturation points .

5.       Don’t exclude other channels that have a lesser ROI. Strangely, this seems to be less of a problem for brands i.e. brands will still invest an extortionate amount of money in PPC, when often, other channels like SEO will offer a much better ROI.  A balanced marketing mix is required with channels selected based on the revenue they can deliver and not the ROI they offer.

The above may seem fairly obvious but I think we all have fallen fain of ROI. Ultimately if you’re achieving a better ROI it would seem you’re getting a better deal but it might come at the expense of your bottom line.

Team Tamar