Marketing ROI for Dummies – Part One

Virtually ALL marketing loses money in the near term. The only exception I know of is a DTC brand we all know well. IT may or may not be on the home page. This wunder brand generated 5-10x return in terms of monthly unit sales, more than easily paying the ad bill. 

But 95% of you will not be able to bank on this. And not just because you’re not DTC. 

Why?

Let’s assume you make a typical 80 cents per unit for a distributor-pushed, premium-priced, early-stage brand with standard markups to the retail shelf. If you spend $50,000 on a ‘brilliant campaign’ (which I shall not define here), how many incremental units do you need to sell to break even? 40,000 incremental units. In cases of 12, that’s 3,333 cases. Basically, a couple of truckloads, at least.

What?! Yes, this is why companies raise money for marketing. Hopefully, they do, at least. 

Then comes the issue of measuring those incremental units you need to create. When you use a fast-twitch marketing method like field marketing for snacks and beverages or anything bought weekly or on impulse, you can generate a local store lift (or DTC lift) in a matter of days, certainly within a week for a brand with local awareness.

Oh yes, there HAS to be some local awareness near where you are sold (i.e., the shopper base connected to the shelf you’re on)—kindling for the fire. 

But, more importantly, you have to be willing to LOSE money on the campaign as you sell those units. 

Suppose you are NOT for sale in multiple channels locally. In that case, you can see how quickly this becomes more challenging because you need to find hundreds of new repeat buyers who also shop at your retailer, even though I guarantee your retailer has suboptimal locations if it is a supermarket chain. Guaranteed. 

So, out-of-store marketing is much more efficient when you can be in 2-3 retailers in key geographies. Easy. To. Find. Boom. 

But all is not lost in the quest for incremental units. The key is to stop trying the futile exercise of measuring actual cash register sales lift attributable to your marketing. This is your sales team setting you up…to fail.

This Friday, I deliver hope! A modern, simple way to infer marketing ROI does not require complex models. It’s not accurate by NASA standards. It’s just good enough for a fast-growing brand to use marketing to sustain rapid growth. Marketing-as-insurance. So, check back here later in the week for that post…