Another Problem with the ROI Metric…
Yesterday I wrote about how using ROI is an almost impossible task for agencies (ROI – the Marketing Catchphrase Agencies Just Don’t Get), despite the fact that so many of them use the term regularly in their marketing efforts. One of the biggest problems with a simplistic approach towards ROI is that fallacious assumption that your marketing efforts primary business metric should be to maximize ROI.
Because ROI is expressed as a percentage, maximum ROI should rarely be the goal of a marketing effort. I’ll use the simple case of YellowPages advertising to illustrate my point. Now, we all know that nobody looks at the Yellow Pages anymore. And nobody advertises in them. Like never. Poor starving Yellow Pages. This widespread consensus has led to rapidly declining costs for Yellow Pages advertising – the laws of supply and demand being what they are.
Some people do read the Yellow Pages. And that back of the YP book cover that used to cost $50,000 is now only $500. And that ONE client a month who called you that year because of that ad…generated a huge ROI b/c the cost of acquiring them was only $41.66 ($500/12 months). Yet a law firm does not subside, let alone grow on one client a month. So this massively profitable campaign, which generated the firm’s highest ROI across all of their marketing channels should never be thrown out, but it should never be depended on either. An agency following the “Maximize ROI” maxim from their marketing materials would have put this law firm out of business.