WHAT IS AN ACCEPTABLE MARKETING ROI?
“So is this a good Return on Marketing Investment?” asks your manager.
Your manager is asking this question not to find out whether your marketing team's efforts are creating a buzz, generating awareness or foot traffic. These are all great, however what is a good result for your business and how does it compare with similar players in your industry?
The good news is that there is a way to answer this question so that you know whether your marketing department is genuinely achieving acceptable Return on Marketing Investment targets that creates a sustainable, profitable business.
Return on Marketing Investment (ROMI) benchmarks you should aspire to
As a benchmark, let us consider 2:1 revenue to marketing cost ratio. As the average investment to produce or acquire a piece of content to sale is around 50% of the retail price, a 2:1 Return on Marketing Investment ratio would not create a profit for most businesses. And it's likely that in this scenario they not even break even when overhead costs are added to the equation.
Our suggestion would be to make sure you keep a minimum Return on Marketing Investment ratio of 5:1. The reason for this is that this ratio allows for non marketing costs to be absorbed as well. Plus it is considered both achievable and desirable for most businesses.
Lastly, another factor to consider is time. Over time your content should build as growing assets for your business. Judging your content marketing on a short-term basis only is too harsh a measure. Allowing time to mature, as authoritative content is wise. By doing this you can also monitor your benchmarks over time as well.
Monitor your competitors Return on Marketing Investment for a comparative view
Monitoring your competitors Return on Marketing Investment is very hard indeed. However, you can create your model from subscribed data sources on things like ad spend that are matched with assumptions and agreed hypothesis on critical data inputs like gross profit levels. Monitoring your competitors in this way allows your marketing department to set goals for improvement. It also shows how your marketing department is driving accountability within your business.
Ready to put all this theory into practice?