According to Entrepreneur, one of the most profitable franchises to open is a McDonalds fast food restaurant. Here’s how to do it:
You invest about 1M. Your first year and subsequent year's gross sales will be in the neighborhood of 2.5M. If you self-manage, you should clear at least $250,000 per year.
Would you do that? I wouldn’t. Four years to see a return? I think a return that takes four years is not so great.
Do you have a burning desire to attract new leads into your funnel? Would you spend a dollar to make two? Here’s what you need to know about the inner workings of digital marketing ROI and lead generation.
(I'm not including email marketing because email marketing is not lead generation, it’s lead nurturing.)
Digital Marketing ROI: Sample Case Study
Pam owns a business in the professional services vertical and now wants to focus on digital marketing ROI and lead generation. Her business is two years old and is beginning to scale. Pam now wants to budget for digital marketing to meet her growth goals.
Her goal is to add five new clients per month for the first year, and because a good company grows better as it grows bigger [Source: Brian Halligan], she feels she can add even more new clients, perhaps 6-8 new clients per month second year, and even more during subsequent years through marketing.
LTV (Lifetime Value)
Each of Pam's clients spends an average of $1,000 per month and stays on as a customer for 10 years on average. These numbers equate to an LTV of $12,000 per customer per year. By adding 24 new clients first year (2 per month), she is planning to grow her business during her first full year of digital marketing by roughly $288,000. She plans to spend $60,000 per year doing so.
From one of Cohort Marketing's ROI spreadsheets: At a gross margin of 30%, that’s 44% ROI for the first year.
The number above only account for first year growth. Subsquent years should produce even more profit.
Let's change verticals. Would a commercial construction company want to do the same spend of $60,000 to capture one 10-million-dollar project, per year?
While all marketing (digital or traditional) carries some risk, the ROI potential of a good digital campaign is stunning across many verticals.
Before you do anything, you need to work these numbers for yourself, considering, at a bare minimum, your current LTV and growth goals. From there, it's possible to forecast minimum KPIs on metrics such as click through rates (CTR), and landing page conversion rates.
Current Digital Marketing Channels and ROI
Over the years, we’ve discovered a high correlation between these three factors:
- Cost of channel.
- Ease of execution.
The newer, more complicated or even freaky, and more costly channels produce the greater ROI, whereas the cheaper channels, ones that anybody can execute, produce the lowest ROI or take more time to produce measurable results.
As new channels of digital marketing become available, first adopters are often Fortune 500 companies. These companies, reap the higher marketing ROI, not because they are wealthy (how did they get there?), but because they are risk-takers.
Let’s dive into the top three lead-gen digital marketing channels:
- Age: Since the 90’s.
- Ease of Execution: Today, there are many free or nearly free platforms available. Very easy to execute, just buy a template and go.
- ROI: A website is the foundation for all digital marketing, but lowest ROI if all you have is a website to display your branding and offerings.
Remember when having a website was really something? At one time it was the only piece of digital marketing. Then came SEO, Google, Adwords, Inbound Marketing, PPC, Facebook, Twitter, content marketing, landing pages, calls-to-actions, e-books, etc.
While web professionals don’t recommend it, today many 50M companies will pay $50 for a WordPress template and call it good. Will these companies be around after their founder is gone? Maybe not, but the point is that the oldest channel of digital marketing—the website, has far less perceived value today than it once had.
2) Inbound Marketing
- Age: Term coined in 2005 by founder of Hubspot, Brian Halligan, but really didn’t come into its own until about 2011.
- Ease of Execution: Manageable by competent internal teams or through outsourcing.
- ROI: Very high if done correctly, integrated with a good website. Some factors influence success such as domain authority and your niche vertical (the aggressiveness of your competitors).
Much inbound is done without regard to conversion rates or creating content for key personas or paying attention to SEO keywords. When inbound is adopted using a carefully crafted strategy, it typically produces the lowest cost per lead but at the cost of poor short-term wins.
Inbound is the long game. You start now, and never stop.
3) Facebook Advertising
- Age: Newest of all digital marketing channels.
- Ease of Execution: Executing campaigns is complicated and even mysterious. Very few agencies or internal marketers have mastered lead generation using this channel. It's even a foreign thing to some verticals who stay in the "safe" zones of traditional marketing like radio advertising. Facebook constantly evolves, making it necessary to both stay on top of this channel and to constantly monitor and adjust ad campaigns.
- ROI: Very high, like Inbound, but with immediate wins.
Getting Into the Game
With any focused digital marketing ROI and lead generation initiative such as Inbound, Facebook, any other PPC (pay per click) platform, including Google Adwords, if you focus on the spend, what you’re trying to accomplish won’t work.
Companies whose primary focus is on budget, don't easily move forward. If your company's primary focus is on lead generation and crushing your sales goals, and you believe you can do it, you'll succeed.
To begin, you need to nail down your goals, look at some current metrics, develop a strategy, forecast some KPIs, launch, and then monitor the results.
Want to talk more about this topic? Why don't you book some time?