Marketing ROI: 5 questions to ask your marketing consultant about ROI
“Ah, I....erm....well, it’s....erm.....how about that engagement, though?”
A lot of marketing consultants tend to go a bit ‘Hugh Grant’ when they’re confronted about return on investment (ROI), preferring to lean back on easy stats – vanity metrics – to prove their marketing effectiveness.
“Look at the number of website hits,” they’ll say. “You got followed by [INSERT INDUSTRY BOD HERE] on Twitter.”
These are called vanity metrics for a reason. They look good on the surface but underneath, they’re empty. The reason marketing charlatans shy away from discussing ROI is that they can’t prove their own. It’s also the reason our Marketing Directors run towards the issue with open arms. ROI can prove beyond doubt how effective our marketing efforts have been in a business.
The next time you get into a conversation about return on marketing investment, fire these five questions at your marketing consultant, sit back and wait for their Four Weddings and a Funeral moment.
Question 1: How do you calculate and demonstrate ROI?
If you’ve been working with a marketing consultant for a while and they haven’t yet provided a breakdown of your ROI or a detailed marketing dashboard, it’s likely your budget is being poured into a leaking bucket. You need to plug the holes quickly or find someone with a better bucket. ROI can be complex, but it’s not the mystery some marketers like to make out.
Question 2: How much budget do you need for marketing?
This is a trick question, really. The important thing, first and foremost, is their marketing plan; the budget should not be their primary concern. If they say ‘as much as possible’ or ‘we’re gonna need a few thousand pounds’, before they talk about the need for a wider strategy, it might be time to slowly usher them towards the exit.
Get up to speed: Marketing theory for non-marketers: Budgeting
Question 3: What’s my CPA?
Don’t say cost per acquisition either. Ask specifically for CPA, and watch for the flicker of recognition, or lack thereof. Cost per acquisition is calculated by taking the total marketing budget and dividing it by the number of new customers acquired. A simple equation, but one that should determine every marketing decision you make. It should be applied to every channel and marketing campaign you work with and is crucial for long-term marketing planning.
Get up to speed: The two marketing metrics every business should measure
Question 4: What’s my customer LTV?
Again, any consultant or marketer worth their salt should understand the abbreviation for lifetime value. LTV is the revenue you can expect to achieve from a customer in the time they’re with you. If your customer lifecycle is 18 months and the average customer spend is £1,000 per month, this leaves you with a lifetime value of £18,000. Simple. But also crucial when ascertaining marketing budgets and spend.
Get up to speed: 3 metrics to prove why you should market MORE to existing customers
Question 5: Where should I be spending money?
The answer to this question will depend on whether you’re already working with the consultant in question, or you’re interviewing a new one.
An existing marketing consultant should have devised a solid, documented marketing plan, and be working off it on a weekly basis. The right answer, in this case, should be ‘where we’re getting the most return.’ They should know what marketing channel or channels fulfil this criterion, and be prepared to demonstrate results on their marketing dashboard.
For an incumbent, the answer to the question should be something along the lines of, ‘I think *these* channels might work, but we need to sit down and work out a detailed marketing plan first.’ It certainly shouldn’t be ‘VR’ or ‘social media’.
Get up to speed: 7 questions to ask before you set your marketing budget
So there we have it; five questions to make your marketing consultant squirm in their seats. While we don’t have the answer to ALL your marketing questions (yet), we can help diagnose and treat your current marketing issues. Let’s start with the diagnosis. Our Marketing 360 Healthcheck will help you see how your marketing is performing in key marketing areas.