When it comes to digital marketing, forget industry benchmarks and focus on ROI

  Written by Louis Gudema

money1Often when I’m talking to a potential new client they’ll ask about industry benchmarks (“Our CTR is two percent, how does that compare to others?” or “Our CPA is $50, how does that stack up to X competitor?”). And the reality is that, unless you are Google, it may be impossible to know how your performance compares to your industry, and especially to that of another company. And, even if you could, does that really matter?

I like to give an example of a hypothetical company that’s created an amazing new database, and through great SEO work it’s been able to attain the #2 ranking for some important keywords used by people looking to buy a database. However, the #1 position is held by Oracle and the #3 position is held by Microsoft, and #4 is MySQL. Do you think that new player would get as many click-throughs as Oracle, Microsoft or MySQL would in the second position? Of course not: brand equity matters.

And brand equity matters when it comes to PPC ads, display ads, email marketing, social media efforts, and all other digital channels. And, in the great circle of marketing, all of those can help build, or undermine, a company’s brand equity, too.

I’ve done a lot of marketing for educational institutions in my career. In the category of “small liberal arts college” you might have institutions as different, and geographically dispersed, as Smith, Morehouse and Claremont-McKenna. How should industry benchmarks affect the marketing strategies of those?

Plus, it’s impossible to predict in advance precisely how you’ll do compared to others. First, we all live in “the filter bubble”: Google search results are personalized, so different people may see different rankings and different ads – even different news. (When I search for the term “database” Wikipedia is #1, MySQL is #4 and Oracle is #7. What do you see?) Because of techniques such as remarketing, the display and text ads that I see as I browse will be different from the ads that you see.

This is a dynamic field: not only are you and your competitors constantly changing your digital marketing, but Google, Bing, Facebook and others are constantly changing their algorithms. So even companies that do nothing will typically see their search rankings, for example, bounce around.

So rather than focus on how they’re doing compared to others, companies should instead focus on ROI. If you do this program, could it produce the kind of result that would be profitable for you?

I recently was talking with a company about a range of digital marketing options. When we investigated the cost per click of keywords in their industry, and calculated using a rough estimate of possible click-through rates, it was very unlikely that they could get new sales that would be profitable using PPC. But other digital marketing efforts, including optimizing their site for mobile devices, improving landing page performance, and remarketing, would be likely to be profitable, so we recommended focusing efforts on those.

That isn’t an unusual situation for consumer items with a low price point. But if you’re selling a more expensive consumer item, or a big ticket piece of business equipment, PPC can be a highly profitable technique.

Did I just violate my own advice to ignore industry benchmarks? Perhaps. PPC ads may have very broad expected CTRs, but for some firms they could be profitable at a CTR of.5%. If you’re counting on a 20% or 50% CTR to make your campaign profitable, or a similarly high conversion rate on your forms, you may be waiting a very long time. But more importantly, as you refine and optimize your campaign, that’s when you really won’t know how competitors are doing but do know exactly how you’re doing, and if your campaign is producing a satisfactory ROI. And that is where your focus should ultimately be.

After all, is the CEO or board going to ask you how you’ve improved the company’s CTRs, or how you increased its revenue?

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