This Business News Story Was Uncovered By Us From: https://blog.eonetwork.org/2021/04/why-roi-has-no-place-in-marketing/
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Ben Hirons, an Entrepreneurs’ Organization (EO) member in Brisbane, is the founder and CEO of Due North, a digital marketing agency that engineers strategic, growth-focused systems and products. After his recent blog post addressing why it’s in your best interest to ignore SEO, we asked Ben about the importance of return on investment when it comes to marketing. Here’s what he shared:
I was recently chatting to a good friend who runs a successful plumbing business. He was about to start work with a digital marketing agency.
I asked, “Why did you choose that agency?”
He replied, “They promised me 400% return on investment (ROI).”
I said, “And do you think that’s a good outcome?”
His reply: “Yes, of course. Don’t you?”
The math on marketing ROI
To answer my friend’s question, we need to look at the math of an actual―not fictitious―return.
Let’s say you spend $1,000 to make $4,000, correct? This gives you a gain of $3,000 because with any investment, you’re supposed to get the original amount back plus the return, yes? This immediately brings us down to a 300% ROI.
My friend’s business runs at a 50% gross profit, or in other words, it costs him 50% of his revenue to deliver on his promise. So 50% of $4,000 = $2,000, bringing us down to 100% ROI. ($3,000 less $2,000 gives us $1,000).
Then we’ve got staff wages, which run at 20% of revenue, so we’re another $800 down.
He’s also got other fixed costs. To open his… Read More
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