The $45 Question: What’s Your Online Marketing ROI?

What’s the ROI for your favorite online marketing medium?

My favorite is e-mail marketing.

According to “Taking Names,” a special report from Direct magazine, in 2008 e-mail generated slightly more than $45 in revenues for every dollar spent on e-mail marketing.

I believe this number, because I know myself how to measure revenues from e-mail marketing precisely, so ROI can be tracked to the penny.

(My e-mail ROI is about $75 for every dollar spent on e-mail marketing.)

In addition to e-mail marketing, I also do other marketing activities.

We do a little PPC, and I can also track the revenues generated by Google Adwords precisely down to the penny.

I am also on Twitter and Facebook, but I do not know how to track revenues generated by either or even if they make me any money at all.

Perhaps there are analytics tools for social networking out there that I am just not aware of, and if you can point me toward them, you will have my thanks.

If you cannot track revenues generated by social networking, then I would argue that you cannot reliably and accurately calculate ROI, right?

That being the case, if you are one of the many raving social media fans trying to convince me of its incredible value — why?

Lord Kelvin, the British scientist, said: “If you can measure something in numbers, then you know something about it.”

Conversely, Kelvin’s statement implies that if you cannot measure something in numbers, than you do NOT know much about it.

I am pretty much in agreement with Kelvin. What about you?


798 thoughts on “The $45 Question: What’s Your Online Marketing ROI?

  • What you’re posting here, Bob, makes pre-eminent sense to me. On a strict ROI basis though, what is traditionally known as “image advertising” makes absolutely no sense, since returns for such advertising are not measurable.

    I realize that direct marketers don’t do image advertising, but many large corporations do.

    Are you suggesting that the Coca Cola’s “teach-the-world-to sing” commercial and the “responsible environment corporate citizen” ads by oil companies are simply blowing dust in the wind?

    And what about a recent full-page back cover ad by a new bank called “Ally” in The New Yorker which reads: “We make money with you, not off you?”

    Was the bank throwing its money away with that one?

  • I don’t know whether Coke or the NYC bank are making money from those ad campaigns, and they don’t, either. They are large businesses that can survive even if they spent money on advertising that doesn’t sell (definition of an ad that doesn’t sell: “brand advertisement”). Most small businesses cannot afford this.

  • Diana:

    As long as Lord Kelvin’s ghost doesn’t show up at one of your networking meetings, you’ll be fine.

    Seriously, I think Bob was proposing a strict ROI or numerical accountability for advertising, not networking activities. That said, it seems to me that social media could be best viewed as extensions of in-person networking. Though Bob’s ultimate logic about the numbers issue is unassailable, I don’t see why he feels that twitter, facebook and the like are TOTAL wastes.

  • Dianna: You miss the point. I do things without directly measureable ROI, too. But I do NOT — unlike the new media evangelist and social networking gurus — tell people that I know for a fact THEY should be doing them, too.

  • Bob, I do “brand awareness” advertising constantly. In fact, it’s the primary focus of my advertising. So far I have found two ways to track ROI on such campaigns.

    The first is top-of-mind-awareness. We use a local college statistics class to do a survey where they ask people to “name all the stores in Jackson that sell toys”. This unaided recall gives us an idea not only of how many people think of us but also how many think of our competitors. Prior to starting the brand campaign, our unaided recall was 61%. After two years of “branding” our unaided recall went up to 78%. In our 4th year of branding our single, independent store now rivals Toys R Us and Wal-Mart in terms of unaided recall. (And we sell more toys per year than our local Wal-Mart and almost equal to Toys R Us).

    The second way to track the effect is traffic. Is it going up or down? Fortunately for us, traffic is going up (in spite of the economy here in Michigan and the 15.5% unemployment locally).

    Of course, you have to add in factors such as how well we perform in the store, if we have the right products at the right times for the right prices and all the other factors that influence word-of-mouth and repeat business, but I can emphatically say “branding” works for us.

    As for social media, I use FB to reinforce the brand image and communicate to our fans. I consider that part of our “brand campaign”, but not the whole campaign. Our email newsletters accomplish the same purpose. But radio takes up the bulk of our budget and works fantastically well now that we know how to do it right.

  • Phil: Have you read Murray Raphel? He also specializes in retail marketing, but unlike you, focuses on direct marketing — not branding. You may find some of his methods and case studies to be of interest.

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