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ROI for Search Engine Marketing
September 12, 2005
Return On Investment (ROI) has been a key measurement of success ever since, dare I say, there has been commerce. ROI can be calculated many different ways, but the basis for every determination is the definition.
Whether you are the business owner or an e-marketing manager, correctly defining ROI for your campaign will help you to decide if you are meeting your goals. So, how should you define ROI for your campaign?
As stated earlier, ROI can be calculated many different ways. There are also many definitions for it ranging from technical accounting definitions to (in my view) simpler and more applicable investment definitions. One of my favorites, which captures the simplicity and essence of what most people identify with when they mention ROI, is this:
“The percentage of profit made on an investment.� (quoted from Cnet News.com Investor)
With this definition in mind, here are some basic guidelines for effectively using ROI as a measuring stick for the success of your campaigns.
1. Clarity:
I’m an accountant by trade. One of the things that I find that can cause confusion, disappointment, and even anger is when two (or more) people involved with the same investment have different measures of success. A quick example would be a campaign where one person’s view of a successful campaign might be site visitors who go past the landing page, while another’s view of success is how many site visitors see the landing page. This difference in goals can have a big impact on the focus and overall effectiveness of the campaign. The lesson here is to communicate, communicate, communicate. Don’t worry about clarifying or “over-communicating� your definition of success. Make sure everyone is on the same page. It is a good practice to actually list the definition of success along with the results of a campaign so that all can be clear about the definition.
2. Keep it simple:
When trying to calculate the success of a campaign, there will be lots of numbers and percentages. These are very important, but if not taken in doses, they can be overwhelming. Be careful to keep your definition of ROI handy when looking at all of these because they can divert your attention from your original goal and focus. Also, if your ROI calculation has too many variables, it could either point you in the wrong direction or simply be a waste of time. Try to trim down your calculation of ROI and see if there is a simpler, or shorter, way to come up with it. One final note, when looking for a shorter way to calculate ROI, keep in mind your margin for perfection, i.e., if you can get to within a certain % of your ROI number, and cut out 5 steps, or an hour of calculation time, it may be worth it. It’s also a good idea to re-visit #1 and keep everyone on the same page.
3. Try different measurements:
Perspective is an often overlooked and much maligned term. It is used a lot in this context: “to put it in perspective, we lost 5% more last period in this category as well�. If you try thinking of perspective like an artist who looks at things from more than one perspective, you may gather different understandings of the same thing. For example, I once was able to attend a professional basketball game and was privileged to sit in the second row. I had been to games before, but I was always much further away from the court and players. While in the “cheap seats�, I was in awe of how they moved and how they played, it seemed graceful and effortless. When I sat in the second row I was still in awe, but for different reasons. Now I could see how big the players actually are. From the cheap seats they were all together so they didn’t look any different than the people around them, but when I got up close I couldn’t believe how big they actually were. Needless to say, it squashed all of my fantasies in which I would imagine that “I could hang with them�. Not to say that they weren’t graceful, but suddenly they didn’t seem quite as graceful, nor did it seem effortless either. What changed? My perspective. In reviewing your campaign ROI, don’t be afraid to look at it from different perspectives. Be careful to make sure that your perspective matches your goal, or else you may end up with very incongruous results. By doing this, you may find benefits from the campaign that you never knew were there.
Finally, let me say the ROI can be a very effective, bottom-line, type of measurement for your campaign. Make sure due diligence is performed when determining how you are going to measure ROI before starting, and while planning, your campaign. This will help everyone involved to work together for the success of your campaign.
All posts by Brent Sharp
posted by Brent Sharp at September 12, 2005 12:45 PM
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