As we head into the holiday season, it’s important for retailers to set the proper goals for their paid search programs. Oftentimes we find that companies have adopted a narrow mindset focused on short-term ROI. Although such an approach is profitable in the immediate term, these advertisers risk setting themselves on a course to a death spiral with an ever-shrinking customer base.
So how aggressive should you be with your ROI goals? Ultimately advertisers should be looking to marry the costs they’re willing to pay to the value they will receive in return, keeping in mind that not all value will be initially recognized. By properly understanding the lifetime value of customers and folding that into their return on investment, many advertisers conclude that the optimal ROI for long-term profit and growth is beyond the point of short-term profit maximization, and for some looking to aggressively grow, may be beyond break-even profitability as well.
To learn more about how to maximize your long-term profit, watch the Profit Playbook Google Hangout below, where I speak on the subject along with a panel of other industry experts.
For a more in-depth look at the rationale behind different levels of marketing investment, check out my article, Avoiding a Marketing Death Spiral, now available for instant download in RKG's Dossier 5.2.
Here is the full Google Hangout. To go straight to my part, skip to 15:45.