SCORPION SUBJECT- DEEPER DIVE- MARKETING ROI
Scorpion’s Chief Marketing Officer, Corey Quinn, was brought up with Marketing ROI in mind. “I was brought up through digital marketing, specifically in search — paid search, which is a very measurable channel in marketing...” said Quinn. “...spending dollars in PPC (Pay-Per-Click) advertising in Google in order to create clicks, leads, revenue, and so forth. I’ve always practiced a data-driven approach to marketing, which is how I became very familiar with the concept of marketing ROI. Not just asking ‘what’s the emotional impact of our marketing,’ but ‘are we driving measurable growth?’”
WHAT IS MARKETING ROI? HOW IS IT CALCULATED?
“In digital marketing, the actual return — unlike traditional forms of marketing — is very easily measured. With that, there’s an expectation that there will be a return that you will directly see.
It is an equation, it is something you can actually calculate. It is revenue minus the marketing investment, divided by the marketing investment. It literally means, if you are investing $10K in a marketing campaign, what is the actual revenue generated after you pay for your advertising?”
SO IT’S MEASURED IN REVENUE?
“Good point! There are many ways to measure ROI. You could measure net profits, revenue, gross profits… There are a lot of different ways. But really looking at the revenue that’s generated from that marketing campaign is the simplest way. Subtracting out the marketing investment.”
IS THAT WHERE YOU SEE EVERYTHING HEADED? TOWARDS DATA-DRIVEN MARKETING?
“Well the interesting thing about marketing is that although digital marketing has created a great focus on data, not all marketing is limited to types or channels that are as easy to measure. For example, a YouTube series… There are costs involved, there’s effort, and here at Scorpion, we don’t tie that back to a hard ROI metric, because that’s not the effect we are trying to drive with the series. We are trying to drive brand awareness and help tell our Scorpion story.”
IS BRAND AWARENESS SEPARATE FROM A MARKETING ROI PLAY?
“Yes, I would say so. Brand marketing is very difficult to measure. In fact, that’s the very definition of brand marketing — it’s just not measurable. But that doesn’t mean it’s not important. Some would argue it’s more important than other types of marketing. Some think if it’s not data-driven, then it’s not valuable, and I think that’s a mistake.
When it comes to our clients, I think data-focused marketing is probably something that’s new to them. It can be easy to get overwhelmed by all of the noise, all of the data, and clicks, and cost-per-click, click-through rates, average positions, all the data… so I think it’s important for small business owners, whether they’re an attorney, a home services professional, or a dentist, to know the key metrics on the health of the marketing investments that they are making. Certain data points are important to track.”
WHAT ARE THE KEY METRICS TO TRACK?
“In this context, I like to narrow the conversation to focus on paid search for ROI specifically. When it comes to the type of marketing we do for Scorpion clients, which is comprised of a lot of search engine marketing and PPC, there are three major data points I think are important for our clients to measure:
1. NUMBER OF LEADS
“Number one, the number of leads they’re getting. After a month, or a quarter, can they look back and see how many leads their marketing dollars generated?”
2. COST PER LEAD
“Number two, cost per lead. Taking the total number of leads, let’s say ten for easy math. Let’s say you spent a total of $1,000 in marketing during that month. Then the cost per lead would be $100.”
3. COST PER CUSTOMER
“Ultimately, if the lead is good, they’ll become a customer and bring money back to the business. Then, we want to look at how much we spent for each new customer. Out of those ten leads we were talking about, if one out of ten converts into a customer, the cost per customer is $1,000.”
WHY IS IT IMPORTANT TO MEASURE IN GENERAL?
“One of the things I always say is that if you can’t measure it, you can’t manage it. This leads to a larger concept: It’s important to not just to be working IN your business, but also working ON your business.”
HOW FREQUENTLY SHOULD ONE MEASURE?
“At the very minimum, no less than monthly, quarterly, and definitely year-over-year. Annual measurement is important, especially for businesses with some seasonality. Then the next step is being able to forecast based on those measurements.
Measure the performance metrics — on a per-channel basis or on aggregate. This helps you understand the health of each marketing investment and which channels are driving ROI.
You want to make sure you’re not spending more on marketing than the revenue you are going to get back. It has to be worth it. Not just a spray and pray. The hope strategy never works. It’s about being intentional.”
WHAT ARE THE BENCHMARKS TO KNOWING YOUR MARKETING IS DOING WELL? WHAT’S THE EXPECTED ROI?
“Every vertical or industry is different. For home services, we like to see 4x the revenue versus the dollars spent. For personal injury, legal, we set the expectation around 6–8x the investment. In some cases, we have seen 20x ROI with landmark settlements and opportunities for our clients to make a lot of money. But those are rarer.”
WHAT MAKES SCORPION DIFFERENT FROM OUR COMPETITORS IN TERMS OF ROI?
“We encourage our clients to think about setting their budgets based on a lifetime value (LTV) of a client versus an immediate value or job. Let’s look at a plumber, for example. A plumber can spend a couple hundred dollars to get a new customer. Well, if the customer only generates $200 on the first job, like a garbage disposal issue… When you look at those numbers, that job would be a waste of time because the cost to get the customer and the revenue is a wash. But if you look past the first transaction, if the plumber provides good service and is good at building relationships and long-term trust, it’s likely the customer will continue to use that same plumber next year, and the year after that, etc., which might make the LTV $20,000. And it cost only $200 to generate that customer. When you think about it that way, it’s a no-brainer.
Theoretically, the plumber could afford to spend more like $300–400 or more for that first job, because they are taking into account the customer’s lifetime value. The plumber has to feel confident they can keep that client in order for this model to work, but this gives them a competitive advantage in the field.
And that’s how we operate here at Scorpion — we like to believe we are setting our clients up with leads to customers or clients that will be with them for a lifetime, hence providing a high LTV. Your customer retention is the ultimately competitive advantage.”
HAS ANYONE EVER SAID MARKETING ROI ISN’T IMPORTANT?
“Either they don’t realize metrics exist or haven’t trusted them in the past. But no one in their right mind would want to disregard the data.”
CAN YOU GIVE US THREE KEYS TO SUCCESSFUL MARKETING ROI?
“Number one, continually measuring those three metrics I mentioned. Two, having the mindset of a lifetime value of a customer. And three, knowing your client retention rate is your competitive advantage.”
WHAT WOULD A COMPANY LOOKING TO GET BETTER ROI DO TO IMPROVE?
“I go back to measurement — be looking at it and paying attention to it. It won’t improve on itself. Understand which channels are driving the highest-quality leads, and look at your marketing mix — if you are 90% Google for example and 10% Facebook, but Facebook is really working for you, maybe you reallocate funds from Google to Facebook to get better performance.”
ARE THERE OTHER DIMENSIONS TO HAVING A SUCCESSFUL DIGITAL CAMPAIGN? OTHER FACTORS? LET’S SAY ONE Q4 LOOKS COMPLETELY DIFFERENT FROM ANOTHER Q4.
“Digital marketing is still a very young medium, which means it’s an area of a lot of innovation on platforms that evolve very quickly. What worked last year most likely won’t work in the same manner the year after. You have to work with a partner who is thinking ahead of those innovation curves so you can benefit from them rather than be hurt by them.”
WHAT SHOULD A COMPANY NOT DO FOR MARKETING ROI?
“Some companies get trapped into being too focused on ROI metrics, to the point that 100% is allocated to digital alone, and they are over-indexed. Because there is value in the brand marketing that will have an effect on the digital side.”
IS THERE A MAGICAL MARKETING MIX? IS THERE A PERCENTAGE THAT WORKS WELL IN COMBINATION?
“The way I’ve seen it work depends on the business. Typically, if a business doesn’t have good brand recognition in a market where they are trying to win customers, they are going to have to rely more on digital and direct marketing. But a smart business will do both paid search and brand-based marketing.
It’s sort of a sliding scale, based on how well your brand is known initially, and once it is known, you allocate more and more to your brand. Direct-response initially.”
WHAT ARE SOME CHANGES YOU SEE COMING FOR ROI?
“The costs are going up and will continue to go up as Google and other platforms become more and more competitive. It’s forcing businesses to invest in their brand so they can lower their dependence on direct-response ads. Telling the brand story in the marketplace so you can gain trust. Very well-known brands, you see very little direct response. With brands like Coca-Cola or Nike, you see brand marketing.”