Inbound Marketing Strategy

Why Your Return on Marketing Investment Sucks (And How to Fix It)

Brad Smith
August 2, 2013
Most people get a terrible return on marketing investment. Here's why, and how you can fix it.
Abstract: Most people get a terrible return on marketing investment. Here’s why, and how you can fix it.

Marketing might show up as an expense on your books.

But in reality, it’s an investment in generating future sales.

The problem is that most people invest in the wrong things, and then don’t track their results well enough. So they end up receiving lackluster results (if any) and then give up before they see payoff, or squander their resources on bad channels and tactics.

For example…

Here’s why you should stop “tweeting” so much (and what you should try instead).

Why You Should Stop “Tweeting”

Let’s do a quick experiment…

If you spent 30 minutes on Twitter every weekday (for a month), then how much time did you invest?

Answer: 10 hours.

Now… what did that time cost you?

Because your time is the most finite resource you have. Money will come and go. But time only ticks away — never to be recovered again.

So what is your time worth?

Step #1: Find your theoretical “hourly rate”.

Divide your salary into the average 40 hour work week, and come up with an hourly rate. Or if you’ve hired people to run your marketing, then divide their cost into an hourly rate.

(Go ahead… I’ll wait and give you a few seconds.)

Step #2: Calculate your total investment.

Now multiply your hourly rate by the amount of time you spent on Twitter.

Let’s say your “hourly rate” is $50 and you multiply it by our example, which is 10 hours per month.

That means you’re investing $500 per month in Twitter.

Step #3: What are the results you’re getting for your investment?

Obviously it’s hard to measure all of the benefits social media provides. But let’s use the amount of visitors going to your website, because that’s easy to track. And if you want to sell something, then you’re going to need traffic.

So let’s say you get 200 clicks or visits to your website (for that $500 investment).

Step #4: Next, identify how much your results are costing you.

When you’re measuring or tracking data, you always want to break it down on a per unit basis. That way you can find out if your investment is paying off.

Going back to our example, each click or visitor from Twitter is costing you $2.50. ($500 / 200 clicks).

Step #5: Consider your ROI by comparing it to other alternatives.

So is investing $2.50 per click on Twitter a good idea, or not? Maybe… maybe not.

To find out, you need to compare it to other available alternatives. That will tell you if you’re currently getting your money’s worth, or if you’re throwing it down the drain.

I recently did some experimenting with Twitter’s “Promoted Tweets” advertising. Here are some early results:

I spent $55.76, to get 59 clicks. That’s about $0.95 per click.

So in this example, it’s actually much cheaper, and more cost effective to use advertising than to waste too much time on Twitter (to generate visits to my website anyway).

The Moral of the Story

You’ll never know how much you’re making, or how much you could be making, until you go through an exercise like this.

Then cut your losses on wasteful activities (like Tweeting all day), and put that money towards an activity that gives you better results, for less.

You might be surprised to find that something you thought was a waste — like advertising — now looks like a bargain.

And investing in help will actually make you more money in the long run.

PS: I’m running a “Beta” training program in September and October for 3-5 people. Click here to check out the details →

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