Measuring the ROI is critical to understanding the extent of success (or failure) of your marketing efforts. That way, you can decide what works and doesn’t and tweak your marketing processes accordingly. However, calculating interim ROI doesn’t do much good as you might think.
Let’s discuss why gauging interim ROI is not the best way to evaluate your marketing spend.
Against the Basic ROI Calculation
Now, while you’d find many different ways to measure marketing ROI, the core formula is a simple one:
Marketing ROI = (Sales Growth — Marketing Costs) / Marketing Costs
Now, what happens to this when you calculate interim ROI?
For instance, you have spent $1000 on a marketing campaign that is supposed to run for three whole months. But just after one month, you sit down with a pen and paper to evaluate the campaign’s performance. You find out that the sales haven’t hit the expected mark for that month, so you plan to discontinue the campaign. However, the sales could’ve scaled up exponentially in the next two months provided you had given it a chance; and finally, you would’ve got a positive ROI, and your campaign would’ve been a success.
Negative Effects on the Following Marketing Spend
Here, we have got two different scenarios: positive and negative ROI results. Let’s discuss them one at a time.
Positive Interim ROI Results
You have launched a new product into the market, and you are leveraging every marketing channel at your disposal to its full potential. Now in the first three months of the one-year campaign, you receive an overwhelming response and close more deals than forecasted. You calculate the marketing ROI and see it has gone through the roof.
So, naturally, now you decide to expand your budget in the middle of the campaign. However, the market saturates in the next few months, and the extra pennies you invested go down the drain.
Negative Interim ROI Results
Deals in the SaaS space take comparatively more time to close than in other B2B verticals, usually months and sometimes even an entire year. So, when you see your marketing efforts not improving your sales numbers in the first few months of the campaign, you may choose to discontinue it and lay down plans for a new strategy.
By doing so, you stop nurturing the leads almost halfway through your funnel and near conversion and finally lose them for nothing. Moreover, when you devise a new campaign, you put in more budget, thus increasing your marketing costs by a huge margin.
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Originally published: Interim ROI: Worst Way to Evaluate Marketing Budget?
