Here’s Why ROI Is Overrated

Does it ever feel like you might be putting too much stock in return on investment (ROI) from your marketing? Have you ever thought maybe ROI is overrated? That might sound like a crazy thought, but bear with me for a moment.

ROI is overrated

The problem is, nobody really knows how well a marketing campaign is going to perform until after it’s been implemented.

There’s no such thing as a guaranteed ROI for any marketing initiative. That’s because you have to actually test something before you can get a sense of how well it’ll do.

And you know what works for another business may fall flat when you try it on yours. One size does not fit all in the business world.

But the main point is, how well does ROI capture the effectiveness of your marketing?

ROI Is Overrated

ROI is overratedThe standard view of ROI is related to a one-time investment. Spend $10,000 on an advertisement and get $35,000 back. These days, whether you’re hiring a marketing company or launching a marketing campaign in-house, you should shift your expectations from an ROI guarantee to the bigger picture.

With a myopic view, almost every campaign can feel like a flop because you haven’t given it enough time to start working. It takes several touches to make a potential customer receptive to your message. That means it can be very difficult to pinpoint the effectiveness of one campaign.

In other words, a phone call to the customer may get them in the door, but that doesn’t mean the direct mail and email marketing they were exposed to before that sales call didn’t warm them up to the idea of giving your company a closer look.

The situation is further complicated when you consider all the variables that exist outside of your control.

Consider a furniture store that mails out a fantastic 1-day promotion to customers and prospects, only to find the place empty on the big day. Was it a bad campaign, or did the heavy snowstorm keep people at home?

If you only look at ROI in this instance, you may write off the whole campaign as a flop, but there’s usually more to the story than that one particular metric can reveal.

Over-Reliance On ROI

What does all this suggest in practice? For one thing, it’s important to be cautious when canceling any marketing campaign, because there’s often a ripple effect. Even if it’s difficult to measure ROI is overratedthe direct impact of one particular marketing effort, there could still be a positive effect from it.

It’s also important to remember that different marketing pieces serve different functions. In the earlier example, a phone call brought a customer in for a consultation. But what about that social media marketing campaign that got that particular prospect to raise her hand?

In that instance, your social media campaign was a perfect lead generation strategy, and now you run the risk of damaging the long-term effectiveness of your marketing funnel by removing that valuable piece of the puzzle.

Is quantifiable ROI still a valuable metric?

Absolutely!

Is it the be-all and end-all for your marketing efforts?

No.

The truth is, you may find it difficult to directly measure or track the impact of many marketing campaigns, from social media to newsletters to billboards — but if your sales are improving and you’re getting an increasing number of qualified leads, then your marketing is working. Don’t mess with a winning formula!

Looking At Other Metrics

ROI is overratedThe next logical question is, if ROI is overrated, what should you be looking at instead?

Your net cash flow is probably the most important number you can track. It’s a signal of how much cash is generated or lost over a period of time. If that number is going up at the same time as your marketing campaigns, you have a good sign that you’re doing the right thing. And ultimately, what matters more than the financial health of your business?

At the very least, keep in mind that the interplay between different marketing strategies is very powerful. Some customers are best reached through direct mail. Others through digital marketing. Still others through traditional advertising, and so on.

If you do find yourself ready to pull the plug on one marketing strategy, look at the numbers and try to extrapolate how the absence of that marketing will affect the big picture.

You don’t want to wake up in a week or two and discover that the marketing campaign you canceled was actually integral to your company’s success!

Learn more about a marketing piece that performs well without exact ROI numbers, by clicking the button and requesting a copy of our Amazon bestseller, The Ultimate Guide to Newsletters.

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