ROI optimization Is Not Everybody’s Interest
If you are a CEO or a VP of marketing who is looking for a better ROI (Return On Investment) from your online marketing team you are probably pushing towards ROI optimization. But ROI optimization is something that may contradict other kinds of marketing optimizations that are taking place at the same time. This in turn may cause a conflict between the marketing team and you, because on the one hand they want to fulfill the marketing tasks they have taken upon themselves in order to get better business results while on the other hand the ROI optimization forces them to do less of those tasks, thus pushing them to a position where they marketing decision are not data driven.
In this article I’ll show you several cases where ROI optimization causes such contradictions & how they can effect organizations.
ROI Optimization is For Profits, But Not For Lead Generation
One of your major is that the online marketing team will increase the amount of leads a for the business you manage. Some of those leads will eventually become paying customers which are what you are definitely looking for. The problem starts when you ask your team for ROI optimization. This means that they should lower the amount of generated leads, and instead focus on leads that have a high likelihood to become customers.
In this case any decent marketing manager will tell you that he/she needs to get a fair amount of leads in order to pull the golden nuggets out of them. He/she will also say that time is needed in order to learn which of these leads tends to convert over & for what LTV.
The ROI optimization will force the marketing manager to lower spend on traffic, for the sake of profitability. This will cause the amount of leads to drop basically, or to move to channels whose business quality is in doubt. But hey….wasn’t getting more good leads the basic condition in order to generate profits in the first place?
ROI Optimization is About Making Profits From Conversions, Not About Just Making Money From Conversions
When you ask your online marketing team to get more online conversions or at leads leads that are more susceptive to the business offers your firm advertises it can also create another kind of contradiction in their efforts.
Generating more conversions don’t have to take under consideration the customer life time value. This in turn can mean that your marketing team is generating conversions like hell, but that the average cost per acquisition (or CPA) was too high in comparison with the average income your firm gets.
Of course that you as a CEO is looking for high profitability per client. Thus, when you push you marketing team towards ROI optimization they are starting to analyze the converted traffic & focus only on generating conversions that are profitable for the company. But here are some surprises that may happen in the following period after this strategy happens:
a) There will be a strong drop of the amount of leads.
b) The profitability per client will definitely go up by tens to even thousand percents.
c) There is a doubt that the overall profit will go up.
This puts you in a great risk, because the marketing manager will tell you that his team is having a hard time in scaling the results, due to the strong decrease in the amount of data he/she has to learn from. You may think that your marketing manager is incompetent & doesn’t understand the strategic business goals. I don’t even want to say anything about the tension the whole organization will be in….
What Can Be Done In Order To Avoid These Kind Of Conflicts?
As you can see in my article the ROI optimization doesn’t stand for itself. It’s interwoven with other critical factors in your business’ goals. Thus, the mode of thinking you have to adapt to is a mode of thinking of balancing the goals & understanding the thresholds upon which your marketing team knows when to strive towards ROI optimization.
What I am saying is that you have to decide with your marketing team about the minimum amount of leads & conversions that should be achieved in order to get a positive ROI that will be enough for reasonable survival of the firm (so that rent, paychecks, electricity & water bill will be paid on time & other debts will be paid to the firm’s creditors). After defining that, any increase in the positive ROI will be a bonus, allowing the company to invest in itself & grow for the following business periods.
It’s a simple solution, but solves huge problems with the marketing. Leave a comment & tell me what you think about it.