Why Marketing ROI is Never a Guarantee

The ROI Hang Up

In a professional landscape of annoying jargon, ROI (Return on Investment for anyone who’s taken shelter under a rock for the past few decades) might be the most overused acronym of all. Everyone from CEOs to Directors to entry level associates understand the need and importance of determining just how much you can expect to “get back” from an expenditure of time, money or resources of any kind.  And by no means is the concern misdirected- any business with a focus on growth or profitability can’t just blindly spend its resources. 

Developing metrics for measuring ROI is not only a productive exercise, but a necessary one.  But this is where the conversation gets a bit hairy, because ROI is rarely guaranteed.  There are no magic crystal balls that give businesses the ability to assess the probability or levels of ROI.  If there was, the business world would be nothing short of predictable, stable, and quite frankly, maybe a little boring!

That said however, ROI is still the buzzword du jour and because investable resources are limited and must be spent wisely, it’s a concept that continues to hold significant importance and priority in consumers’ decision making processes. To illustrate, let me share a personal experience about a flooded basement that has been the bane of my existence over the last two months.

The Great Flood of 2016

Earlier this year, January 5th to be exact, I discovered a flood in my finished basement.  It was 7:30pm, my husband was away at a conference in Miami and I was sitting on the couch watching Mickey Mouse Clubhouse with my  2 year old- just moments away from heading upstairs to start her bedtime routine. And that’s when I heard it- a gushing noise coming from my basement. My heart sank.  I jumped up, raced downstairs and saw a flood of water pouring from the basement ceiling,  down the walls and into the carpet which was a sopping, soaking, mushy mess.

Drywall was crumbling, the ceiling was sagging and my furniture, tables, technology- all ruined.  Long story short, I quickly turned off my home’s water supply and called my insurance company to submit my first ever homeowner’s insurance claim. I'll refrain from mentioning any names to protect reputations but I’d like more than anything to tell you the name of this company so you stay far, far away from them!.  

Long story short, my insurance company decided not to reimburse my expenses which after water and mold mitigation, plumbing repairs and reconstruction were upwards of $20K.  They have these people called Adjusters whose sole purpose in life is to screw over homeowners and protect the insurance companies from actually having to pay policyholders when something like a basement flood happens.  

So here I am, $20K in the red with a flooded, now unfinished basement.  I’m also a full time working mom with a demanding career, 7.5 months pregnant, caring for a toddler and have a husband who travels most of the week.  Who has time to deal with insurance claims and headaches?  Not me!  

I needed help so of course, I turned to my long time friend Google and as expected, Google delivered.  I learned that in unfortunate circumstances like mine homeowners have options in the form of Public Adjusters who basically fight with the insurance company on behalf of homeowners, negotiating better reimbursements, advocating for the fair treatment of people like me and championing a positive financial outcome for us.

But as with anything else in life, there’s a fee associated with their services and some are more qualified than others.  I came across a local public insurance adjuster called The Claim Guide, read some reviews and called them.  On their homepage, right above their phone number is the following message:

"No Charge Unless You Receive Funds

MAXIMUM settlement. SHORTEST time. LOWEST fee."

That enticed me so I called them, but I had a few questions.  I’d never heard of a public insurance adjuster before and I wanted to know:

• How much money could they really get me back?
• Would the settlement they got me be enough to cover my damage and repairs?
• How long would it take before I’d see the actual cash money?
• Was this whole public adjuster process actually legit or was I getting my hopes up?

I wanted to understand what my ROI would be.  If I was going to invest my time, optimism and hope in this company, I wanted my questions answered.  But they couldn’t exactly answer my questions (at least not in the way I had asked them). They couldn’t tell me with certainty how much I’d get back and how long it would take.

Those outcomes were based on unknown variable beyond their control, things like the mood of the insurance company representatives at the time of negotiations, how many other claims were ahead of mine in the insurance company’s queue, and whether or not my mortgage company would demand the settlement funds be deposited into an escrow account (I really hope you never have to deal with any of this- it’s such a hassle!!).  

When my ROI based questions weren’t met with guaranteed responses, I became skeptical, and then I realized I was asking for answers that simply couldn’t be known at that stage in the process.  I then sheepishly realized I was no different than the marketing prospects I talk to every day who ask me questions like:

• If we invest $10K/month in a marketing retainer with Stratus, how many new customers will we get this year?
• If we need to increase revenue by 20% this quarter, how many email campaigns do we have to launch?
• How many times a week do we need to blog to increase our website traffic by 4K visits each month?

It’s not that these aren’t fair concerns and questions, but they’re not realistic.  There’s no way for me to know what a client’s results will be before implementing their marketing strategy.  If I could promise ROI, prospects would be flocking to our door, knocking it down and begging Stratus to be their agency.  But it’s just not that simple.  Just as The Claim Guide couldn’t make promises to me due to unknown variables beyond their control, marketing agencies can’t either.  

The Letdown of an ROI Guarantee and A Better Alternative

Why don’t we know how many email campaigns it will take to generate a 25% lead generation increase? It’s because we have to dive in begin piloting the strategy- in the case of email initiatives, we have to experiment with A/B testing subject lines, messaging and Calls to Action (CTAs) to see what resonates with a particular audience.  And while our approach to “experimentation” is not only calculated but also guided by experience expertise and best practices, marketing is not a one-size-fits-all-approach.

Sure I can tell you that for a similar client in a similar industry, we saw the most success using a question-based, personalized subject line with a text-based CTA and generated a 30% open rate with a 40% view:submission conversion rate, but that certainly isn’t going to guarantee you’ll see the same results.  And wouldn’t we both feel pretty disappointed at the end of the year if we made promises to you based on past results only to discover that your buyer personas are more skeptical, less willing to work with a new vendor and generally don’t respond well to emails as a marketing tactic?  

When I speak about the dangers and unrealistic nature of ROI promises in marketing terms, it all sounds perfectly logical, however when I was wearing the hat of a consumer (in my case, a homeowner in distress), I immediately wanted The Claim Guide to promise results. Instead of making guarantees however, they did the responsible thing by talking with me about things within their control:

• Their expertise and experience getting homeowners the money they deserve
• Building trust with me by explaining my options, my rights, and educating me about their process
• Providing me with references to other satisfied customers they had helped
• Showing me documented success stories, not as an indication of what I should expect but as proof of their ability to help clients
• Delivering unbelievably empathetic, responsive and proactive customer service

Rather than telling me what I wanted to hear just to “sell me”, their approach to answering my ROI-driven questions was transparent, factual and authentic.  In turn, realistic expectations were built from the onset of our relationship. So how does this story about a basement flood and a stressed out very pregnant chick end?  Glad you asked.  I chose to work with The Claim Guide.  

I put my confidence in their capabilities and today, less than 6 weeks later, I have a check in hand that will cover the full cost of restoring my basement to its pre-flood condition.  I won’t be paying a penny out of pocket.  

As a business or professional in pursuit of marketing support, you should expect and demand  the same transparency.  Agencies like Stratus can’t (and SHOULDN’T) promise results, but here’s what they should be able to guarantee:

1) A collaborative strategic partnership that is focused on achieving defined goals- in many cases, the strategic capabilities of your agency partner will make or break your marketing success

2) Deep internalization of your company, goals, products and services, culture, buyer personas, industry and competition- Without this a marketing plan is only skin-deep

3) Constant testing and measuring of implemented initiatives- this enables agility so resources are allocated to the right places

4) Ideas- you hired a marketing agency to be the expert right? They should constantly bring you ideas and recommendations for optimal marketing ROI, not the other way around!

5) Transparency- you should never have to wonder what your agency is up to, what they’re working on, how they’re spending their time or even worse, if they’re actually spending time on your account (yikes!).  

All marketing activities should be tied to measurable and defined goals so there’s nothing esoteric or unknown about your plan.  Tools like Tickspot, Basecamp, HubSpot and Google Docs are designed to keep you on the same even playing field as your agency.  You are the client, and you deserve to be “in the know”.

6) Expertise- you can analyze relevant expertise in many ways but the most important factor is actual marketing know-how and experience. An agency may not have expertise within your specific industry, product or audience and that’s not necessarily a bad thing.  

A capable marketing team can quickly ramp up on need to know industry knowledge (see our point about deep internalization above) but years of marketing experience (successes, failures, and all the lessons learned in between) can’t be faked or obtained overnight.

7) References that speak to dedication- Any agency will tell you they’re dedicated to your success (could you imagine the reaction they’d get if they didn’t claim this??!!) but here’s where asking to talk with some existing and past clients proves beneficial.  

Often prospects want to talk with references about results and ROI but as I mentioned above, past results don't guarantee future outcomes.  Instead, a better way for a prospect to leverage references is by finding out how dedicated the agency is to achieving success for their clients.  

Do they go out of their way to try something new and innovative? Do they quickly and consistently respond to calls and emails?  Do they put in necessary extra hours or resources to meet a deadline no matter what, no matter when?

What To Do If A Marketing Agency Guarantees ROI

Easy- run far away.  I’m not kidding.  Unless you’re in the market for a basket full of dashed hopes, disappointments and unmet expectations, pick up your ball and go home.  Choosing a marketing agency is a huge decision and you deserve to know the truth about what you should expect from the process.  

If you could guarantee ROI (not just in business but in life!) everything from hiring a marketing partner to choosing the right public insurance adjuster to help with a flood claim to ordering the most delicious menu item at a new restaurant would be easy, fool-proof and risk-free.  Because that’s not the case and decisions of any kind carry some level of correlating unpredictability, you should do your research and be as empowered as possible in your decision making process.  

For anyone reading this who might be in the process or beginning stages of hiring a marketing partner, we developed a checklist of objective tips called 7 Tips for Selecting the Right Marketing Agency that will help you standardize your search and choose an agency that’s truly right for you.  Good luck and don’t forget to hit the road at the hint of ROI promises.

 

from HubSpot Marketing Blog http://blog.hubspot.com/marketing/why-marketing-roi-is-never-guarenteed
Via http://blog.hubspot.com/marketing/why-marketing-roi-is-never-guarenteed