Trying to figure out how soon you can recoup Marketing ROI on an $x investment and when this becomes a problem.
As a CEO it is very important to understand ROI. Just to be clear ROI stands for Return On Investment. It is very important to be buying based on thoughts of the returns you will get. However if you jump too quickly into calculations there is a good chance you will miss the opportunity.
So here is how this plays out. You are in the middle of a sales call and you like what you hear. You start getting a little excited for two reasons… 1. you want to cut to the chase and speed up the meeting to get to the end, and 2. you just want to know the cost of this solution. These items were partly covered in CEO Marketing Mistake #2: Getting Hung Up on Cost.
The issue here is that by rushing the salesperson you could be cutting corners on clearly defining the project scope. Yes, I know it is the salesperson's fault if they start cutting corners. A good salesperson will not let this happen. However there are many weak salespeople in this world and it is in your best interest to take the time to clearly define project scope, expected returns, deliverables, roles, accountability, etc.
If you try to skip the project scope and just jump to price, a good salesperson should stop you and never give a price without understanding if they can help you and what the scope is. A price too early because you want to see "if you can afford this solution" delivers an incorrect price. This is often something a CEO will get hung up on and stop listening too if the price is too high or too low or different than what you expected.
Let's say the salesperson makes the mistake of giving you a price too early. Then you start calculating what kind of returns you need to get. Again, because this number may be incorrect, doing math and calculations is a waste of time. What is your time worth? Can you afford to waste time? As a CEO there are other problems in the company if you have extra time to waste.
I had a guy pressure me for number a few weeks ago. He was really pushing. So although I knew it was not a good time I decided to share a rough number that should be near where his project would fall. On the spot he started working the numbers. He tuned out. Then when he came back to the conversation he threw out a number that was 15+ times the small number I shared. This was a three month deal at $9000 and he wanted $120K for the investment. Sounds great right? sure if that could be done. Sadly 3 months was just getting him in the game, not closing big deals. So I failed this CEO and screwed the deal. Can we turn this around? Doubtful!
So What's the solution?
For the CEO:
Let the salesperson help define the scope and be patient. If this is the right firm, the salesperson will get around to talking about ROI and the rules of ratios that need to be met in order for the deal to be a win-win. If they don't then run. Feel free to flush this out early by asking "How can you prove the ROI of this solution?". The salesperson should give you a general idea to let you know they DO have a way to deliver ROI. If they fall apart then just end the meeting because they DO NOT have ROI built into their solution.
For the Salesperson:
Be very cautious when throwing around pricing. Try to give the prospect what they need and certainly guide the CEO to ROI and how you will address this in your presentation stage. And bring the CEO back to digging into the root of the problem and seeing if there is a way you can help them. At the end of the day every solution should be about ROI. The sooner you can get to this the happier the CEO will be.
So what can be done to help you get better ROI faster? Make sure your marketing is built upon getting ROI and never buy marketing that does not include how you will get your ROI. Another tip would be… make sure you have the proper sales team to support your growth and fund the marketing. It is better to commit long-term to marketing and if you are unable to set aside 5-10% of your revenue for marketing today then build this into your budget. Talk to your accountant or bookkeeper to help you set this up as a line item in your budget and just set this money aside every month. Then invest this money in a solid marketing strategy based on ROI and hold those marketers accountable to whatever you agree upon. From a sales perspective, having the right salespeople, right sales process, and right growth strategy in place will help set up the correct marketing game plan. At the end of the day the marketing needs to support the sales team. Is sales is in disarray no amount of marketing is going to fix your growth problems.