What is a good Return on Investment for my marketing campaign?

Tips of the Trade,Your Questions Answered

May 15, 2024

You’re wondering what a good return on investment is for our marketing dollars! That is a very valid question to have. And we think is key to you choosing the digital marketing agency that will be best suited to deliver you the best results.

Many digital marketing agencies may brush this statistic under the rug. And while we cannot comment on why they may choose to do so, we can only assume that they are more focused on increasing their billables then their results for their clients. Perhaps one day you will see a shift towards performance based marketing, but as long as the world demands marketing at any level, then you may have a slower transition than we would hope.

With that in mind, what is a good return on investment for your marketing dollars?

Well, the answer is pretty simple. And while it may not always be possible per say, because it may be affected by many variables including product market fit, industry maturity, product quality, reviews, management, employee satisfaction, customer retention and so on, we at least have some benchmarks from successful campaigns and what it yield for our clients.

2-3x Return on Investment

We feel that a 2-3x Return on Investment for your marketing spend (ROI) is pretty much the base level of what should be acceptable and achievable for a very basic and well executed marketing plan. This includes your marketing retainers and management fees, it includes production and graphic design, it includes your outlay for apps and platform fees and includes your ad spend. And while this may vary greatly on your particular industry (some industries yielding a 1x ROI/ROAS may be considered successful when looking at the lifetime value of the customer.), it can act as a pretty good baseline to always aim for.

Keeping a 2-3x ROI goal will help you streamline your operations, consolidate wasted capital expenditure where its not quite necessary and possibly upgrading the people that are handling your marketing campaigns for you (both creative and strategic).

This answer may spur a lot of discontent from former marketing professionals and current marketing professionals. They come from the school of, you pay us our “market rate” and we will just have to see what the marketing results are. While we appreciate and respect the tenure of these professionals in the marketing space, the digital marketing landscape and modern business structures and competition are ever evolving, especially since the dawn of AI. There is typically always a more effective and efficient way to deploy your marketing dollars. And you definitely want a partner that is very well versed in modern marketing methods.

4x-5x Return on Investment

The next level falls in the 4x-5x range. While the variables may be many, a 4x-5x range can often point to one of two things.

One, that you have found a great match, a marketing agency that truly understands your industry, the digital marketing landscape and they are always upping their game and moving the bar to help you accelerate and grow your business. These are not typically agencies that are resting on their laurels, in fact these sort of agencies are constantly leveling up, enhancing their knowledge base through continued education, certifications, masterminds and mentorships.

These are a rarer breed than the 2-3x ROI marketing that is more easily achieved. If you find a digital marketing agency that can consistently return 4x-5x on your investment, then you may want to hold on to them as long as you can. Upgrading on this sort of investment will be pretty difficult, but not impossible. Even finding another provider that can deliver equal marks will be pretty challenging.

When you stack the concept of lifetime value of your customers, these sort of returns can really ramp up your top and bottom lines for your business. We see these kinds of businesses, especially those that keep their foot on the pedal, continue to snap up market share from competitors and growing at up to a 100-200% Compound Annual Growth Rate (CAGR) for early stage companies, 30-40% CAGR for established companies and 15-25% CAGR for mid and larger cap companies.

While a lot of the impetus may rely on a successful and experienced digital marketing agency, it may not always be achievable. Sometimes factors such as product market fit, market saturation and industry and economic trends may sideline the best laid plans.

If you feel that your product market fit may not be right, there is always the possibility to pivot to another similar or related product. Sometimes the product may be right, the targeting and demographics may be slightly off. There are ways to fast track the discovery of your product fit and its definitely a conversation worth having with a seasoned marketing professional. If the past has proven you do have a proper heading on your product market fit, then skip ahead to the next variable.

Sometimes, you might just be operating in a saturated market. Its easy to see this in the brick and mortar world. When you have a fixed population in a certain urban area, how many wing joints can it support. Sure, each can differentiate themselves with different specials, menu items, decor, staff training, quality and management, but ultimately there is a certain amount of dollars being spent on dining out for the casual wing experience in any given square mile radius. So if you think that you have a winning product market fit or service market fit, and your return on investment is suffering, sometimes its just a shift of geographic scenery, a shift in your targeting strategy or hoping over to a complementary service that differentiates itself just enough that it makes your offering unique so that it is not competing for a fixed pool of consumer dollars.

If you feel that you have the right product/service market fit and that you don’t have saturation in your immediate marketplace, you may just be going through a lean period in the industry/economic era. We have seen many previously successful companies get side tracked, side lined or shut down all together as a direct result of things such as the pandemic, the housing crisis or the dot com bubble bursting.

We certainly empathize with anyone that was affected by any of these tragedies, but there is something to learn from the companies that actually accelerated during these down times. Those that were proactive in adjusting their focus, their tactics, their products, their demographics and targeting, their geographic locations as well as their margins, were able to gobble up market share from competitors.

And while we do not advocate a cut throat business mentality, we do understand that competition is healthy and should exist in a free market. That is why it is even more paramount that you partner yourself with a smarter working and experienced marketing agency. They can help you foresee some industry headwinds as well as give you insight as to how to form a protective moat around your business so that it can weather the lean times and emerge on the other end stronger than ever before.

6x+ Return on Investment

This class is reserved for the truly elite marketing agencies. These agencies are rock stars. They are constantly deploying their clients’ capital expenditures as if it were their own money. Making forward thinking suggestions based on years of competitive research and analysis. They take the time to truly understand your unique industry, the challenges that exist and could possibly exist and steer you towards the marketing that will yield only the highest results.

You’ll know you are with a rock star agency when they aren’t suggesting that you simply “spend more” (unless of course you can scale without hurting your ROI multiple.) They will instead always look for better ways for your to deploy your marketing budget consistently looking for what is yielding you the best return.

6x+ return on investment is rare, and has a compounding effect when other factors are considered. While we certainly advocate sharing rock star agencies with your friends and family members because the growth is very impressive, we do understand if you want to keep these gems to yourself! While we cannot speak for other agencies, we can tell you that we have achieved 8x, 10x, 15x, and 20x Return on Investment for clients and have done so pretty consistently. But that really goes back to our bootstrap roots. We got our chops marketing with $0 budgets. So we began working hard to understand various industries and how to attract more clients, larger audiences and more customer spend with tactics that were free or cheap.

We utilize this same exact methodology today, even though the clients we work for are much better equipped financially then those cash strapped start ups of old. But our penchant for success is still as vibrant as ever. We fight for your success, each and every day we are deploying and executing your marketing plan. We are quick to adjust and adapt our clients’ marketing initiatives and budgets to make sure that we are achieving the most with the resources that we have.

This dedication to success of our clients has encouraged us to take on a select few clients that we feel we can have the greatest impact for. At the end of the day, our clients’ success is our success and if we aren’t doing the very best to help them grow, then its not worth taking them on in the first place. We realize that home runs and grand slams are rare, and we focus on hitting singles and doubles for our clients, but we always have our eyes on knocking one out of the park as consistently as possible.

Think that we align with your brands mission? Reach out, we would love to have a conversation with you to see if we can help you achieve the “unimaginable!”

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