It’s something that we’re often asked,
‘What kind of return can I expect on my investment?’,
so let’s try to answer this as it is relevant to everyone we work with.
Goals
There are number of ways to look at your return on marketing investment. For us, it starts with understanding your goals. It seems reasonable that a return on investment should be moving you towards your goals!
When we start working with a client, we are looking for realistic attainable goals, that we both will be working towards. A common goal is, simply, an overall growth in leads through your marketing. Once we have agreed attainable goals there’s no reason why we shouldn’t meet them. In fact, we will always discuss your goals early in our conversations with you, then we keep circling back to these goals to make sure that everything we do moves towards achieving these goals, and there is a real understanding of what we’re out to achieve.
Achieving the goals, is one of your ROI’s (return on investment). You invested our fee to get the return we agreed we were working towards.
Setting Expectations
As with all marketing, it’s not always possible to get that return on investment, and it would be disingenuous to make return on investment promises.
What we can do is observe certain activities, metrics and ‘signals’, that allow us to tweak and adjust, and give us confidence that things are happening, that we are heading in the right direction.
Not making rash promises for ROI and measuring as we go gives early warning if the return on investment is not going to be achieved, so we can make changes as early as possible. But equally, things could go the other way and your return on investment could be greatly above what was agreed or expected.
Leads & Sales
So, perhaps we’ve agreed that an increase of 50% in leads through your website, by email or by phone enquiry per month is what you are looking to achieve. Therefore, if you’ve currently an average of 50 combined leads per month across all channels, you are looking to grow this by 50%, to an average of 75 per month.
This sounds okay and if we’re able to generate those additional 25 leads per month it gives you the return on your investment.
But what if we bring you an additional 50 or 100 leads per month?
Let’s Look at ‘Leads’
Before we go to far, we should stop for a second here and look at one word in particular, ‘leads’.
There is a difference between leads and sales.
It’s important that the difference is understood because we are generating leads for you, not sales – you are taking these leads and closing the sales!
This means that if we increase your leads, and we can all verify that these are quality leads – and are all your target audience, you should naturally be increasing your sales. This isn’t the case where clients don’t fully understand where marketing stops, and sales begins.
Some are expecting sales to happen from our efforts without them being involved. While this will inevitably happen, as your brand message, presence and standing strengthens, your marketing will bring some direct sales, but it’s not often going to increase sales to the levels you may be expecting. If you are looking to increase your sales by 50% this is something different all together.
Leads are exactly as the name suggests, they are leads. We are leading interested parties to you, we are leading them through your marketing and into a place (a website form, and email, a telephone call) where they are making an enquiry, on enquiry, it’s your job to convert them into a sale.
Hopefully, if you are in the set that thinks marketing is sales, you are starting to see the difference.
Conversion Ratio
Now let’s look at what you do to get a sale and how many leads you need.
We’ll always ask about your lead conversion rate; How many leads do you currently have coming in each month? How many do you convert to sales?
Many of those we ask don’t know those numbers, but they’ll have a guess. A recent enquiry said that they had an average of 50 enquiries a month and of those 50 they may convert 1 to a sale, but they only required 1 or 2 conversions a month.
That conversion rate isn’t great, but it tells us a lot:
- Some would say that the only way to convert more leads into sales would be to generate more leads.
- Some would say that if you only need to convert 1 or 2 per month and you say you are doing that, why are you spending additional money on marketing at all.
- Some would say that the amount of time spent on checking, replying, waiting, following-up to get a meeting or a proposal from 48-49 dead enquiries shows that your marketing and website isn’t working as well as it should.
Value Added ROI
The reality is, if you are talking to us, we know that you require more than 1 or 2 sales a month to sustain or grow your business and you are having to do a lot of work to get the hit-or-miss sales you are getting from the wrong leads.
So, could it be that your return-on-investment, rather than increasing your workload of leads each month, would be better thought of as generating fewer, better-quality leads, that means less work for you, for a higher return of sales?
We think this is a much better ROI and gives you a better chance of success for your part of the process too.
Let’s look at some examples of return on investment. Each of the tabbed example scenarios here show how the numbers look:
- Leads: 50 leads per month
- Client time investment: Average of approximately 50 hours follow-up per month (including initial enquiry processing, reply and follow-ups, full proposal for 1-2 enquiries).
Let’s assume that our client charges £150 per hour for their time. This process has cost them £7500 per month in their time to hopefully generate 1-2 sales each month. - Sale value: In this case let’s assume a client sale is worth £10000. 1-2 sales per month if generated is £10000-20000.
- Agency fee: None, the client carries on as they are.
Revenue generated:
The net revenue generated and return on investment from the clients own efforts after removing their time is
£2500 - 12500 per month (profit)
- Leads: 75 leads per month
- Client time investment: Average of approximately 75 hours follow-up per month (including initial enquiry processing, reply and follow-ups, full proposal for 1-2 enquiries).
Let’s assume that our client charges £150 per hour for their time. This process has cost them £11250 per month in their time to hopefully generate 1-3 sales each month.
Plus, the extra time spent by the client to create the 50% growth in leads – let’s estimate an additional 10 hours at £150. That’s an additional £1500 of the clients’ time each month. - Sale value: In this case let’s assume a client sale is worth £10000. 1-3 sales per month if generated is £10000-30000.
- Agency fee: None, the client carries on as they are.
Revenue generated:
The net revenue generated and return on investment from the clients own additional efforts after removing their time is
-£2750 - 17250 per month (deficit or profit)
- Leads: Agency briefed just to bring in 50% more leads = 75 leads per month.
- Client time investment: Average of approximately 75 hours follow-up per month (including initial enquiry processing, reply and follow-ups, full proposal for 1-2 enquiries).
Let’s assume that our client charges £150 per hour for their time. This process has cost them £11250 per month in their time to hopefully generate 1-3 sales each month.
This time no extra time spent by the client to create the 50% growth in leads. - Sale value: In this case let’s assume a client sale is worth £10000.
1-3 sales per month if generated is £10000-30000. - Agency fee: As this is an example, let’s suggest that the fee was £2500 per month.
Revenue generated:
The net revenue generated and return on investment from the clients own efforts and those of the agency after removing their own time and the agency fee is
-£3750 - 16250 per month (deficit or profit)
Our approach: To analyse and fix what’s not working to attract a more relevant enquiry and a better value ROI:
- Leads: Let’s say that because of the re-evaluation of the client’s website and marketing messages the traffic to the website has in fact dropped.
We’re no longer getting visits from those that don’t fully understand what the business does, and most visitors are now fully target audience.
Generating 15 leads per month - Client time investment: Average of approximately 20 hours follow-up per month (including initial enquiry processing, reply and follow-ups, full proposal for 2-4 enquiries).
This figure doesn’t come down to 1 hour per enquiry as the enquiries are now more specific and related to possible sales.
Let’s assume that our client charges £150 per hour for their time.
This process has cost them £3000 per month in their time to hopefully generate 3-5 sales each month as the enquiries are high quality and more sales enquiry based. - Sale value: In this case let’s assume a client sale is worth £10000. 2-4 sales per month if generated is £20000-40000.
- Agency fee: As this is an example, let’s suggest that the fee was £5000 per month.
Revenue generated:
The net revenue generated and return on investment from the clients own efforts and ourselves after removing their own time and our fee is
£12000 - 32000 per month (profit)
The Real Return-On-Investment
These 4 scenarios hopefully demonstrate what return-on-investment is and how different it can be. The reality of many of our clients is that they do want to decrease their workload AND close more sales, so the fourth scenario is what they are looking for.
Agreeing the right ROI, focussed on your goals has several benefits:
- With our approach, the client has increased their sales
- They have also considerably decreased their workloads
- The business is Market Oriented, and ‘marketing’ activities are done, consistently and effectively
- Leading to the strengthening of their brand against their competitors
- The increase of reach and visibility to a relevant audience gives you additional social return on investment
- Organic growth through search
- As the agency, we have paid for ourselves.
The next time you’re asking someone in marketing how to calculate the return on investment, think about what really could be gained from working with them. We’re not the type of business that will give our clients or potential clients bold statements about what to expect, we think a little smarter. We think about what they really want and what they really need and how we can continue to build upon that to enable them to get a genuine ROI.