Ready, Launch, Brand: The Lean Marketing Guide for Startups
Orly Zeewy - Zeewy Brands

Zeewy Brands


The ROI of Marketing

The Evolution of Marketing

Before the worldwide web brought the world to us, marketing was primarily focused on convincing consumers to buy your company’s product instead of your competitor’s. Sales brochures were printed by the millions and advertising was king. TV, magazine and newspapers ads were filled with promises of a happier life if only you purchased a certain brand of toothpaste.

Eventually, consumers started to view marketing as a means to convince them to buy things they didn’t really need. As consumers started to turn away from advertising, ROI diminished and business owners began to think of marketing as something akin to “smoke and mirrors.” This led to a new paradigm that marketing was unnecessary and a waste of money so it wasn’t surprising that when the economy took a sharp downward turn in 2008, companies started to slash their marketing budgets to reduce expenses. The problem with that strategy is that marketing is the engine that runs sales, so turning off the engine eventually shuts everything down.

In today’s digital age, marketing has evolved into a shared experience that is focused primarily on content marketing and includes videos, blogs, white papers, and social media feeds. The engine is social media, and companies are scrambling to keep up with consumer demand for engagement. The statistics are compelling. Every minute, Facebook users generate 4M likes, Twitter users send 456,000 tweets, and 46,740 photos are posted on Instagram. Consumers seek out the advice of influencers and expect their brands to engage with them daily. The most successful brands offer customized content that is not only relevant to their customers but is also aligned with their core values and the products and services they offer. The good news for startups is that with the right content strategy, they can multiply the value of their marketing dollars.

Defining ROI

In our bottom line focused culture, CEOs are impatient to see immediate returns on their marketing dollars. They often expect their CMO to take a modest marketing budget and magically turn it into new customer sales and healthy revenue but marketing is not like selling a widget. It’s not simply about deducting the cost of goods sold (COGS) from the selling price and spitting out a profit and unlike a widget, marketing ROI does not live on a balance sheet. It’s an investment that a company makes in its future growth and success.

“Content Marketing is a commitment, not a campaign.”
Michael Brenner, CEO, Marketing Insider Group

A May 2018 article in Investopedia explains it this way, “Marketing is a long-term, multiple-touch process that leads to sales growth over time.” Companies that see marketing as an investment, focus on long-term goals and metrics, not short-term gains or losses.

Measuring ROI

The Investopedia article provides a more realistic equation to help CEOs measure marketing ROI. Here is an example: say that sales are seeing an organic growth on average of 4% per month over the last 12-month period, then your ROI calculation for the marketing campaign should strip out 4% from the sales growth.

Sales Growth – Average Organic Sales Growth – Marketing Cost/Marketing Cost ROI

If a company averages 4% organic sales growth and runs a $10,000 campaign for a month, the sales growth for that month is $15,000 and 4% ($600) of that is organic based on historical monthly averages. The calculation is as follows:

($15,000 – $600 – $10,000) / $10,000 44%

Another ROI that CEOs rarely consider is the impact that marketing can have on slowing down negative sales growth. If sales have been dropping $1,000 a month on average and a $500 marketing campaign results in a sales drop of only $200 that month, then the ROI is the $800 ($1,000 – $200) you avoided losing.

ROI may be flat or low as the campaign starts to gain traction but as time goes by, sales growth should follow and the cumulative ROI of the campaign will start to improve. If after six months, there is no uptick in sales, then a review of your marketing strategy is in order.

In a 2016 interview on the podcast B2B Nation, Marketing Insider CEO, Michael Brenner explains content marketing ROI this way: “Committing yourself to building a content brand is like building a retirement account. If you put money into a retirement account, it might not look like much in a year. But after five years, you start to see the impact of the investment. Content marketing works the same way. When you track the results, you start to see compounding rates of return. If you publish an article two or three times a week, and you do that for 52 weeks, what happens is that there’s an accelerating increase. The first article you publish is still getting page views a year later. It’s gaining reach to an audience.”

Traditional marketing is not dead but it’s expensive and doesn’t work when you’re trying to establish your competitive advantage. It’s a much better fit for established brands with deep pockets. Startup founders should resist thinking of marketing success as a 30-second Super Bowl spot. At $4M/spot, it’s reserved for brands like Apple and Nike to help them maintain their leadership status. Startup marketing should focus instead on building brand awareness and growing social media followers. Social media helps brands stay current on industry trends and keep their content relevant to their customers. It also helps measure engagement, build buzz and convert customers into brand ambassadors. Instead of worrying about their lack of advertising dollars, startup founders should be building a content strategy. The first step is to follow the social media feeds of leading brands over a 3-month period to learn how they engage with their customers and what content resonates with those customers. Remember that the proof is in the numbers. If your company has less than 200 followers, it’s time to re-evaluate your content.

Marketing is a marathon, not a sprint. It’s not a one and done. That’s why a strategy is critical to success. What are you hoping to achieve? Is it building brand awareness for your startup? Is it about increasing market penetration and growing sales? Or are you building the case for an acquisition or getting ready to take your company public?

Resist the impulse to change course too soon. Multiple and inconsistent marketing campaigns can negatively impact your company, and make you look indecisive and disjointed. In the long run, a short-term approach to marketing can hurt your brand image and make it harder to build brand loyalty and that’s bad for business.