By Arko Chandra Published on : Dec 1, 2022
Measuring the ROI is critical to understanding the extent of success (or failure) of your marketing efforts. That way, you can decide what works and doesn’t and tweak your marketing processes accordingly. However, calculating interim ROI doesn’t do much good as you might think.
Let’s discuss why gauging interim ROI is not the best way to evaluate your marketing spend.
Now, while you’d find many different ways to measure marketing ROI, the core formula is a simple one:
Marketing ROI = (Sales Growth – Marketing Costs) / Marketing Costs
Now, what happens to this when you calculate interim ROI?
For instance, you have spent $1000 on a marketing campaign that is supposed to run for three whole months. But just after one month, you sit down with a pen and paper to evaluate the campaign’s performance. You find out that the sales haven’t hit the expected mark for that month, so you plan to discontinue the campaign. However, the sales could’ve scaled up exponentially in the next two months provided you had given it a chance; and finally, you would’ve got a positive ROI, and your campaign would’ve been a success.
In short, interim ROI is incapable of showing you what your final ROI would look like.
Here, we have got two different scenarios: positive and negative ROI results. Let’s discuss them one at a time.
You have launched a new product into the market, and you are leveraging every marketing channel at your disposal to its full potential. Now in the first three months of the one-year campaign, you receive an overwhelming response and close more deals than forecasted. You calculate the marketing ROI and see it has gone through the roof.
So, naturally, now you decide to expand your budget in the middle of the campaign. However, the market saturates in the next few months, and the extra pennies you invested go down the drain.
Thus, even if the interim ROI results are positive, basing your marketing decisions on that without assessing the other factors wouldn’t be a calculated move.
Deals in the SaaS space take comparatively more time to close than in other B2B verticals, usually months and sometimes even an entire year. So, when you see your marketing efforts not improving your sales numbers in the first few months of the campaign, you may choose to discontinue it and lay down plans for a new strategy.
By doing so, you stop nurturing the leads almost halfway through your funnel and near conversion and finally lose them for nothing. Moreover, when you devise a new campaign, you put in more budget, thus increasing your marketing costs by a huge margin.
Therefore, making decisions based on negative interim ROI results hampers your ongoing marketing efforts and even hurts your pocket.
Calculating interim ROI may seem like you are keeping track of things regularly, but on the flip side, you fail to gauge the full potential of a marketing campaign. You even fail to understand what and how much return the marketing budget that you’ve spent brings you. All of this affects your future marketing budgets and decisions negatively, like an array of dominoes (even if not directly).
By now, you might have been convinced that though measuring the ROI every now and then might seem a responsible thing to do, it fails to show the actual picture to you. It’s only a volatile thing that changes on the go, banking on it may turn out risky for your business.
By Arko Chandra
Published on 1st, Dec, 2022
Measuring the ROI is critical to understanding the extent of success (or failure) of your marketing efforts. That way, you can decide what works and doesn’t and tweak your marketing processes accordingly. However, calculating interim ROI doesn’t do much good as you might think.
Let’s discuss why gauging interim ROI is not the best way to evaluate your marketing spend.
Now, while you’d find many different ways to measure marketing ROI, the core formula is a simple one:
Marketing ROI = (Sales Growth – Marketing Costs) / Marketing Costs
Now, what happens to this when you calculate interim ROI?
For instance, you have spent $1000 on a marketing campaign that is supposed to run for three whole months. But just after one month, you sit down with a pen and paper to evaluate the campaign’s performance. You find out that the sales haven’t hit the expected mark for that month, so you plan to discontinue the campaign. However, the sales could’ve scaled up exponentially in the next two months provided you had given it a chance; and finally, you would’ve got a positive ROI, and your campaign would’ve been a success.
In short, interim ROI is incapable of showing you what your final ROI would look like.
Here, we have got two different scenarios: positive and negative ROI results. Let’s discuss them one at a time.
You have launched a new product into the market, and you are leveraging every marketing channel at your disposal to its full potential. Now in the first three months of the one-year campaign, you receive an overwhelming response and close more deals than forecasted. You calculate the marketing ROI and see it has gone through the roof.
So, naturally, now you decide to expand your budget in the middle of the campaign. However, the market saturates in the next few months, and the extra pennies you invested go down the drain.
Thus, even if the interim ROI results are positive, basing your marketing decisions on that without assessing the other factors wouldn’t be a calculated move.
Deals in the SaaS space take comparatively more time to close than in other B2B verticals, usually months and sometimes even an entire year. So, when you see your marketing efforts not improving your sales numbers in the first few months of the campaign, you may choose to discontinue it and lay down plans for a new strategy.
By doing so, you stop nurturing the leads almost halfway through your funnel and near conversion and finally lose them for nothing. Moreover, when you devise a new campaign, you put in more budget, thus increasing your marketing costs by a huge margin.
Therefore, making decisions based on negative interim ROI results hampers your ongoing marketing efforts and even hurts your pocket.
Calculating interim ROI may seem like you are keeping track of things regularly, but on the flip side, you fail to gauge the full potential of a marketing campaign. You even fail to understand what and how much return the marketing budget that you’ve spent brings you. All of this affects your future marketing budgets and decisions negatively, like an array of dominoes (even if not directly).
By now, you might have been convinced that though measuring the ROI every now and then might seem a responsible thing to do, it fails to show the actual picture to you. It’s only a volatile thing that changes on the go, banking on it may turn out risky for your business.
