ROI Is a Number, Not “Awesome”

Courtesy: BusinessInsider.com

Courtesy: BusinessInsider.com

You probably get them as much as I do: those sales calls from people who can “guarantee top positioning in Google and other search engines”.  Little do they know that when they call me, they’re talking to someone who doesn’t mind showing them just how little they know about search engines and business in general.  Heck, if I can keep them on the phone a couple seconds longer, that’s hopefully someone else saved from hearing their snake oil spiel in the first place.  On one such call, I let the gentlemen finish his whole script and he proceeded on the hard sale.  I asked him one question: “What kind of ROI can I expect to see from your services?”

“Oh, our ROI is AWESOME” was his response.

Um…no it isn’t.  Last time I checked, ROI was a calculation where you take earnings minus cost divided by cost multiplied by 100 to get in percentage terms [((E-C)/C)*100], which I’m pretty sure leads to a number…not AWESOME!  The analysis of how that number meets expected goals may lead to the label of “awesome” and high-fives all around, but ROI itself is simply a number.

If you’re wondering why I’m ranting on this, it’s because this is the perfect example of mixing up the difference of results and the interpretation of the results.  This is critical when it comes to monitoring PPC performance.  You could have a 500% ROI, which some might consider awesome, but what if your break-even point required a 750% ROI compared to other activities you could have done with those resources?  Ladies and Gentlemen, in this case “awesome” has left the building and you have some explaining to do.

Since PPC can be factored down to the penny at a keyword level, don’t consider ROI as a goal, but as a floor to build on.  Look at your daily or weekly reports and ask yourself “Can I be happy with these results if they continued for X amount of time?”  If the answer is no, then you just reviewed the actual results, and interpreted them to be insufficient (aka “not awesome”), regardless of what the actual ROI is.
If you know that to break even after shipping, commissions, taxes, and all other costs that you need a 250% ROI from PPC (or $2.50 ROAS…same thing) then you should set your floor at 250% and not your goal.  Set goals in three forms: Ideal, Expected, and Acceptable.

  • Ideal is shooting for the moon and really worthy of being called “Awesome”
  • Expected is profitable and sustainable.
  • Acceptable is north of break-even but you really want it higher.

This is especially critical if you work with agencies because agencies will ask you what your target is, and if you say 250% they’ll give you as much volume as they can at the 250% to spend as much as they can (assuming their compensation is based on percentage of spend).  So remember…awesome is a goal, not a number.  ROI is a number, and not a goal.  Setting a given ROI as a goal is awesome, so long as you know what your results should be.

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9 Comments

  1. Twitter Comment


    RT @jisaac Great article about the misconception of ROI with online advertising [link to post] ROI should be a number not a word

    – Posted using Chat Catcher

  2. Twitter Comment


    Great article about the misconception of ROI with online advertising [link to post] ROI should be a number not a word

    – Posted using Chat Catcher

  3. Twitter Comment


    RT @Nowsourcing ROI Is a Number, Not “Awesome” [link to post] –Working on an ROI focused landing page for our site.

    – Posted using Chat Catcher

  4. Very interesting article about ROI. I never had such a cool with someone advertising ROI as an “awseome” number but I believe that You had 🙂 Telephone marketers often say something silly, there is no secret about a fact that they are not the specialists in who’s name they’re advertising so I think that their voice could not be really representative to the company they’re representing.
    .-= pozycjonowanie´s last blog ..Praca w fabryce keczupu =-.

  5. The hardest part is understanding the meaning of ROI and start using it.
    You are damn right. Some people should start making the difference between words and numbers.

    xx

  6. That’s awesome 😉 haha. ROI is a number that tends to just get thrown around but not many people know what to do with it or how to interpret it. You made a good point that it should be used as a marker but not the final goal.
    .-= Elizabeth´s last blog ..Is there a payoff with social media? =-.

  7. Your blog post was… awesome! Lol, no, really you make an excellent point. It can be easy for folks unfamiliar with Internet marketing to forget that you can measure everything. Thanks for the lovely reminder.
    .-= jlbraaten´s last blog ..The Top 8 Best Free Audio Podcast Downloads on the Web =-.

  8. Twitter Comment


    ROI is a number, not “awesome” [link to post] I love the title.

    – Posted using Chat Catcher

  9. While I laughed reading your post, it really isn’t funny. Answering “Our ROI is awesome” is wrong on so many levels. I hear these answers quite a bit these days — it shows me that the person calling has no idea what he / she is talking about, they have little interest in understanding, and are just trying to make the sale. Great, great post! Thanks.