Commentary

ROI Expectations Too High

One of the biggest problems we face with new advertisers is that their expectations for ROI are set entirely too high.  Whether the new advertiser is renting an e-mail list, placing a banner, or buying leads, that advertiser needs to set proper ROI goals. If the advertising is purchasing without the proper ROI goal set, then the advertiser will always wind up being upset and discontinuing the relationship.

 When advertisers come in to purchase any type of advertising they are excited and motivated, as they should be -- and it is these feelings that can make them delusional about a realistic ROI.  It is our job as publishers, networks, and affiliates to explain rationally what the ROI will actually (should) be.  If we are not upfront and honest about these things, we will be setting ourselves up for failure, because we are allowing advertisers to retain their delusional thoughts.

Sometimes being honest will have a negative effect. The advertiser, with visions of grandeur, will be taken aback by the news that your firm will not be able to reach the ROI. They will say that another firm has promised that they can produce this ridiculous ROI. We need to accept that if we cannot produce the ROI, we should let this client go. Staying honest and sticking to your guns is how you remain professional. Then, when the advertiser goes to Firm X and gets nothing from their investment, that advertiser will remember your professionalism and return to you.

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It is your responsibility to explain that advertising metrics are based on mathmatical equations and statistics. When you are selling on-line banner display on a CPM, the only guarantee you can give is the amount of impressions you can deliver. You can ESTIMATE what the CTR will be based on past ads and their similarities, but then you cannot tell the advertiser how many people will actually become buyers. You can again give an ESTIMATE based on past ad performance (if that has been shared with you), and this is again where honesty comes in. You need to inform your new advertiser that these are in fact ESTIMATES. If your conversation with the advertiser begins and ends with, "your last 'guy' bought ten million impressions and made $20 million," those numbers are what the advertiser will expect, and you will lose that advertiser when those numbers are not met.

I am a big fan of lead-generation and the effects it has on ROI.  When a new advertiser comes in, lead-generation is almost always my first recommendation.  If an advertiser has a $3K budget a month, you can sell them name and e-mail for $3 a lead and produce 1,000 leads a month.  I then explain that what they are purchasing are genuine leads --people who are slightly interested in their product.  I also explain that they are then in charge of aggressively marketing to those leads if they want to achieve the industry standard of 1.5% effective rate.  What that means is they could get 15 people buying their product.  If that does not make back the $3K that has been invested, I explain that still more revenue can come in from those leads. The fact is that they are holding tangible information of ,000 people who are interested in products like their own.  They can then utilize this information later, for renting (if their Privacy Policy states that) or just doing more marketing for their other products.  Once we have sold a company leads, and we have followed through on the ROI as we said we would, we can then upgrade them to on-line or e-mail effectively.  This is because they trust what we say and our relationship is solid.

The point of this article is, when it comes to setting the expectations of ROI for an advertiser, honesty is the only policy.  Let them know that if they make back the amount they have put in, the campaign is a success. 

We all want the same thing: long-standing relationships, and to generate a great deal of money.  I guarantee, if you are honest with advertisers, even if a campaign is not effective, they will come back and buy again. 

 

      

4 comments about "ROI Expectations Too High".
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  1. Howie Goldfarb from Blue Star Strategic Marketing, November 6, 2009 at 12:05 p.m.

    Great insight from real life.

    I think everyone who is spending money on any sort of marketing, should stay focused on having the ability to generate some sort of measurable ROI end results from their efforts. This enables them to benchmark, then weigh the best formats for their marketing needs. I don't think anyone should be 'hoping' for an ROI number before ever conducting an marketing effort.

    Once you spend money and measure the results, you can do a proper analysis of what is working best, and decisions on how to improve the results next time you spend.

  2. Reuben Segelbaum from Syncapse, November 6, 2009 at 1:12 p.m.

    Finally....honesty from an executional level and not just trying to make the sale. Even in a pitch this morning, explaining to a client options of how to interpret results can vary....from helping them to make a sale, to assisting in an accelerated client experience, all elements should be taken into account.

    Being honest...without a doubt a must, but being able to explain variations of how to interpret numbers to understand and justify the spend, of equal importance.

  3. Peter Rosenwald from Consult Partners, November 6, 2009 at 2:11 p.m.

    Good article and once again the ROMI (Return on Marketing Investment) is the focus. The problem is that most clients just don't have the tools or the patience to develop the metrics to determine their ROMI and see if this expectation matches benchmark metrics.

    If marketers would worry less about the creative content of the message and more about the viability of the medium in terms of their target market and the costs of reaching it, things would improve.

    Want to know how to do it? Go to www.accountablemarketing.info and see if the available metrics can help you.

  4. Stuart Long from HotFussDesign, November 9, 2009 at 4:44 p.m.

    Great article John, new and first time advertisers will eventually learn what to expect in terms of ROI. They will quickly gravitate towards those who provide honest assessments, reliable performance and attentive service.

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