Digital Marketing is not a Vacuum – The Story of Bob

By November 5, 2013Strategy

In today’s digital marketing world, it has become extremely easy to track direct return on investment (ROI).  Whether it is click-through or view-through conversions, figuring out the results of your spend can be seen in real time.  This brings up an issue that is being ignored—marketing channels do not operate in a vacuum.

Here is an example:

Bob has a website that sells jewelry.  To this point, all of his sales have been word of mouth.  Bob now wants to grow his business.

First, Bob is smart and sets up all the ways to maximize his existing customer base.  He implements retargeting, sets up email marketing, and maximizes his social media channels.

Now, Bob has grown his revenue, and his ROI on his marketing spend is about 6:1

Bob is smart, though, and recognizes he has grown his revenue, but not his customer base.  It is time to start reaching new customers.

Bob implements behavioral marketing.  He spends a month’s worth of revenue to see what kind of results he can get, while still maintaining all of his other marketing.

Using tracking systems, he tracks the direct traffic from his banner ads that are targeting similar characteristics to his current customers.  After a month, he looks at the ROI.  It is only 1:1!

For every dollar he spent, he only made a dollar, and that doesn’t even include any other expenses!  Obviously, this is not a scalable marketing channel, and Bob shuts it down.

Here is where Bob went wrong.

Sure, the immediate and direct return from his behavioral marketing efforts was a complete wash and even a loss, but he forgot a few things:

  1. Branding – He still received a ton of brand recognition from all the ads running.  Now, tons of more people know about his jewelry site, and the next time they are looking to buy, they may visit him.
  2. Retargeting – Even though he only made so many direct sales, his retargeting efforts using cookies has now picked up the rest, and all the new visitors he had drawn in are seeing his brand everywhere on the net.
  3. Emails – If he was smart (and Bob is smart), he was capturing emails of these visitors.  Now he can send them promotions and updates to draw them back and remind them to shop on his jewelry site.
  4. Social – Maybe he didn’t get sales immediately, but a lot of people from the campaign started contributing on his social channels since their behaviors show they like jewelry.  His community has grown, and his viral coefficient (and word of mouth drivers) have significantly grown.

Fast forward a couple months and Bob now sees that his revenue has grown significantly.  If he continues to ignore growing his customer base, he will maintain this level and see no growth, but a higher ROI.  If he wants to grow his business and make more money, he will have to invest in reaching new customers.

The moral is simple—if your goal is to grow, you need to accept the fact that you sacrifice immediate ROI for rapid growth, but as long as you have the systems in place and a good product, you will see a much higher ROI down the line.

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