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Why 100% ROI isn’t for everyone

January 21st, 2008 Posted in PPC Basics

Many search marketers look to the web for meaning when trying to class observed metrics.  It’s no wonder, with everyone talking about return on investment, return on ad spend, and conversion metrics with little to no contextual reference.  There isn’t a one-size fits all solution for every given metric, and your ROI will differ from another marketer in a different industry.  It’s true, 100% ROI isn’t for everyone.

“Real Deal” ROI or Analytics ROI?

In what now feels like long time ago, I helped a company struggling to achieve meaning in their metrics rationalize their numbers by running tests to determine what was good and what was bad.  What many marketing departments fail to realize is that although your metrics may indicate a relatively poor conversion rate, or ROI, your actual revenue numbers might be far more optimistic (or pessimistic, for that matter).

As online marketers, we have to understand that our metrics are only as good as our tracking allows.  I touched on tracking accuracy a few days ago.  In addition, many companies find it nearly impossible to correlate offline conversions with online campaigns, even with accompanying promotional codes and dedicated URLs.  Heck, some larger companies find it hard to correlate contact form submissions to search marketing campaigns because of multiple publicity impressions (i.e. television, radio, print, online, etc).   Some of the most grueling challenges include:

  • Lack of effective communication between sales and marketing departments
  • Poor tracking implementation for analytics and/or back-office CRM tools
  • Latent revenue success metrics due to slow decision makers
  • Conversions by visitors resulting from multiple offline/online campaigns
  • Fraudulent orders and “truing-up” the metrics reports

To be honest, not all of these challenges can (or should be) resolved.  Often times it’s easier to find the variance of a campaign through occasional order sampling and applying an accepted range to all reported data.

Testing makes life easier

One easy way to rationalize metrics and determine the full impact of any given online campaign is to optimize your landing pages by performing A/B testing, or multivariate testing.  Google has a great solution for Adwords Advertisers called Website Optimizer, which uses almost fully-automated dynamically created landing pages.  Omniture has their own version as well but it requires multiple fixed landing pages.

After a significant amount of data is collected (a chi-squared or t-test will suffice), the search marketer will know with greater certainty whether their initial numbers were relatively successful or whether there is room for improvement.  As I have mentioned several times before in this and other posts, there is no one-size-fits-all answer that will tell you whether your click-through rate is good or not, it’s up to you to determine.

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