Why ROI Is More Important Than Your Up-front Response
Using ROI analysis, you can test products, promotions, offers and lists to see which ones generate the most sales, have the highest costs and give you the highest profit margin. Making good decisions based on your test results is the road map to achieving your business objectives. In some cases, the results will be clear and you’ll know which offer is better. At other times, you may get higher sales but a lower profit margin. You’ll need to decide which result will help you meet your goals.
Do you want to minimize your financial risk?
Of course you do! ROI can help you minimize financial risk, which is a big part of making good business decisions. Before finalizing your direct marketing plans, be sure to do a quick ROI analysis. The results may surprise you and save you a costly mistake.
When evaluating new marketing campaign ideas, an ROI projection can help you determine the odds of success for a new offer or promotion idea. If you’re considering an expensive, new direct mail package, the lift in response needed to produce a winner may be completely unrealistic. The low chance of success may not be worth the expense and time given the high risk.
Before raising your prices, use an ROI analysis to evaluate the potential impact on your bottom line based on best-case/worse-case scenarios for the impact on your response rate and back-end results. Good pricing decisions are critical to your success.
Do you have the time for this?
Yes, you can do it over lunch! An ROI analysis can be a simple calculation on a napkin or a complex computer model. Sophisticated marketers may factor in the cost of money and the lifetime value of a customer, but any direct marketer can use a basic calculation to make better decisions. A simple analysis can be better than a sophisticated model if it means you actually take the time to do it.