Who would ever think such a thing? Of all the KPIs, ROI often is the measuring stick of success with Facebook™ ads and for business in general. But sometimes too high an ROI may not be best for you. Here's why:
ROI Issue #1
If your ROI is too high, you may be leaving money on the table. The 50X ROI from our sample construction company in another article is absurd. Oddly, if you were to lower ROI, you probably would make more money. It's dollars you take to the bank, not ROI. ROI is only a signpost of success, not actual success.
Look at the "PPC+Inbound" line in this spreadsheet:
Running two channels of marketing, PPC (Facebook™, Google) and Inbound, reduces ROI, but doubles ad spend. Sounds horrible, right?
But look again:
While sample ad spend doubles from $5,000 per month to $10,000 per month, profit increases by $30,000. So by reducing ROI by doubling ad spend makes money. The money made in this case comes from spending $5,000 to make $30,000 profit.
Note that doubling ad spend may not double sales acquisitions, but it can make you more money over time. The time factor is not static. It may mean varying ad spend from one channel to another depending on your goals and what's actually producing.
PPC is the highest ROI producing channel for quick wins, and if using the right campaigns, for the long game also. For new funnels, you buy ads, get quick wins.
But if you run this case study five years from now the Inbound channel with it's evergreen content may be producing more sales volume than PPC is. So ad budget and allocating funds to some specific media channel is fluid. The data will drive the strategy.
Furthermore, producing SEO / Inbound content produces brand awareness, not just organic traction. So again, it may not be best, even with a high ROI brand, to throw budget to just one channel.
Some companies understand the importance of branding: "We blog 365 days a year, including holidays, to enhance our place in our industry." [Source: James LaFlamme, CEO, Biopharma Global]
The data doesn't lie. If the Inbound channel eventually gains traction over some PPC channel, then we'd suggest it's time to rethink the funnel, maybe promote content rather than run ads. Digital marketing is a data-driven science.
ROI Issue #2
A second caveat to too high an ROI is that at some point your competition is going to wake up. Basically, if you're making too much money too easily, someone else is apt to figure it out.
Your competitors are not entirely stupid. It would be unwise to think that. If they see the same opportunity you saw, you're in trouble unless you've beaten them to the punch.
Best to shore up your marketing now, spend some money, gain some traction, before your competition does. Unless you're in a market that's completely saturated, you can gain ground against your competition before they wake up. After they wake up, it's too late.
The Sweet Spot
How do you know what's the best ROI to achieve? You won't. And if you did, what you know today could change tomorrow.
ROI is a nice place to start—really the best KPI benchmark to glace at quickly, but again, it's really the money you're taking to the bank that matters.
And if you're going to bank on your success, you'd better have a very good marketing strategy to do so.
Who would think of sacrificing ROI for market share? The big brands do—basically they assume risk to invest in their company's future.
In the end, those who become successful have tenacity. The mythology that dictates short-term wins can equate to a short-term business. Some things never change, like playing the long game to stake your claim on a future of success.
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