This isn’t one of those posts where I tell you, “YOU CAN’T AFFORD NOT TO DO DIGITAL MARKETING!’ Those suck. Instead, here are four questions you should ask (yourself and others) when trying to decide whether it is worth moving forward with digital marketing. In this context, digital marketing could include any digital channel including search, pay per click, email marketing, etc.
The 4 Questions
Do I have a strong foundation?
If your website isn’t responsive or mobile friendly, don’t worry about digital marketing. Get a new website. Without a responsive website, spending money on any of these digital channels is like throwing money in a wishing well (without the warm fuzzy feeling you get from the nostalgia of throwing money into a wishing well). For instance, working on search engine optimization without having a mobile friendly website doesn’t make sense as Google will penalize your related search results harshly. You, or your digital marketing vendor, may find that instead of being found easily for a relevant search term, you show up 50th or not at all (even after months of work). Take the time, make the budget available and get a new responsive or mobile friendly website.
If you have the foundation, let’s think about the return you’ll need to get on the digital marketing services to make doing them worth your while. To calculate that, you’ll need to know some things.
How much is an average lead worth to my company? To figure this out, I recommend tallying up the number of leads you have received over the last 6 months, then looking at what percentage of time the lead turns into a sale. Based on the average sales price, you will have an answer. For example, perhaps you have 10 leads in March. 5 became sales. The average sale was $1500 for a total of $7500. That means the average lead was worth ($7,500 in sales/10 leads) $750.
If your company has recurring revenue come in from a single lead, you should count that overall number instead of the one-off purchase price. To do this, look at how long a client typically stays with you and how much their overall lifetime spend will be with your company. For example, maybe you are a software company that charges a licensing fee of $800/yr and the average client stays with you for 4 years, the average lifetime spend is therefore $3200. This is the number you should use when trying to understand the average ‘worth’ of a lead.
How many leads would you need to break even on a 6 month digital marketing engagement?
If your average lead is worth $750 and the digital marketing commitment is for 6 months at $1200 per month (a $7,200 commitment), then you need at least 10 (10 leads x $750/average lead worth) web-based leads over a 6 month period to break even. Remember that this will vary if you end up closing more or less of the leads than you typically have in the past. Also remember that breaking even should never be the goal of any marketing endeavor since other costs, like ‘keeping the lights on’ are not factored in.
How many leads do you need to make it better than your other lead generation options?
If you already have another marketing option that will provide a return on investment of $3 for every $1 spent, then you would need at least 31 leads during that same 6 month period for it to make sense to choose this new digital marketing option over the known option (this again, is based on the example numbers from the previous paragraph). PLEASE NOTE: If the other lead options aren’t always available or won’t continue providing worth after the campaign is over, they may not be as good as some digital marketing options! For example, if the other lead generation option that provides you a 3:1 return is a one time only event/show/conference, it is not comparable to search engine marketing. Search engine optimization, when done well and with best practices, will continue providing you search traffic long past a one-off event would and is not limited to the people that came to a show or conference.
What is the Return on Investment (ROI) for a digital marketing plan and how long will it take to begin seeing this result?
The answers for these questions should come from the digital marketing agency or digital marketing vendor you are communicating with. The answer may be unique for your specific company and industry. For example, we typically try to provide a custom ROI goal based on a number of things including:
- A client’s industry
- Does the client have a history of doing the right/wrong search engine optimization practices?
- Does the client have a good existing website?
- Which digital marketing channel they want to focus on
- Previous digital marketing history – successes/failure
You Are Ready
With all of these answers in hand, you should be able to determine whether or not a digital marketing plan makes sense for your company. If you would like for us to come up with a digital marketing solution for your company, please fill out the form. It is free and only requires 15 minutes of your time.