Is your marketing budget getting scrutinized by stakeholders and you’re under pressure to explain the ROI? Stop coming up with lukewarm answers that can’t win an argument and watch this video to learn how to justify your marketing budget. Is marketing worth it? How long will it take to make marketing pay off? In this video Eric Siu shares his thoughts on why big brands spend so much on their marketing campaigns and how you can apply the same principles in your business.
If you’re planning to start a marketing career, proving your ROI is the number one thing you’ll need to know, otherwise you won’t have a marketing budget.
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Full Transcript of The Video
A lot of people, when you think about ROI on campaigns, especially those of you who have e-commerce businesses, it's like man, I really want a five to one, a 10 to one ROI where I put $1.00 in and I get $5.00 back. Great. Okay. Great news. Okay.
Other companies like Microsoft for example or even salesforce, these enterprise level companies that are doing billions of dollars, or even if it's a business that's doing $8 million to $9 million a year, they don't worry about the front end ROI. They are looking to find their break-even point. They're looking to even break even on the front end. So, they're not looking to make money, but they know their numbers so well that they're okay waiting, deferring on their revenue, because if they spend $150,000 to acquire one client and they know after in one year they're going to make $1 million, they're going to do that all day. It's just simple math.
So, you got to find your break-even point first. That's very simple. You can just Google it on how you can figure out your break-even point. Then also, I recommend reading the book Dotcom Secrets, because that's about improving your marketing funnel. Getting your funnel in place. Understanding your numbers at each stage of the funnel. What are your conversion rates at each stage of the funnel? Then, afterwards, realizing how much money you're driving from each step of the funnel.
So, here's an example. Russell Brunson, who is the author of that book, Dotcom Secrets, he had a campaign where he would drive people to an mp3 stick. The offer was free. You would pay at $9.00 for shipping. It was free for the mp3 stick, but afterwards, after you paid for it, there's an upsell. After that upsell, there's another upsell, then another upsell. Those numbers all added in together. Every $15.00 that he spent, he would make $32.00. That's a profitable campaign, but most campaigns, he's going to break even on. So, if he spends $15.00 to acquire $15.00, that's cool. You're breaking even, but you're getting free awareness. So, that's worth it.
Now, if you're looking to kind of analyze the ROI in general, it's a very simple formula. You just put in the revenue, subtract cost, divide it by cost and then I believe you multiply it by 100% and then you're good to go. Yes. In the very beginning, if you have stakeholders, maybe you're trying to prove an ROI, maybe you're trying to prove that marketing works, but long term you got to build out a great funnel. This is how you maximize your marketing, because then you have an engine that's working for you afterwards, nurturing the relationship, figuring out where to put people in your marketing automation sequence and then you have a complete marketing system.
It's not just about siloing SEO, ad words, email marketing, sales, like all this stuff. You put it all together and that's how you ... We'll just call it Megazord Marketing. Maybe I should quote that. Megazord Marketing.
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