Superx
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There's several important thing we need to follow to make sure we get a positive ROI (return on investment). ROI is important but not if you want to maximize your profits.
Just to make sure we are all on the same page, let's define ROI. Down below is a simple formula used for any type of business when determining ROI.
ROI tells you whether you have profited or not and how much % your initial investment was.
Let's say you spent $100 on ads, and your ROI is 100%. This means you have spent 100% of your money, plus 100% on top of that which would be your profits.
Example: ($200-$100) / 100 = 1 X 100 = 100 SO YOUR ROI IS 100%
This is the easiest way to calculate and understand what your ROI is.
WHY ROI ISN'T THE MOST IMPORTANT METRIC
It's very easy to get excited about a great ROI %. The higher the ROI the better right? WRONG
ROI is just a simple calculation as I showed you above, let's not get twisted over ROI, because in the end it will hurt maximizing your profits, which is the most important factor we need to be focused on.
Let's be honest we are here to make the most profit that we can. Making $10 for every $1 spent is all fine and dandy and an excellent ROI, but if you keep doing that daily, what's the point you would make $70 a week, 1000% ROI but virtually no profits.
Ask yourself this what would you rather have? A campaign with 30% ROI making $500 a day or a campaign with 1000% ROI making $10 a day? If your here to make money you would choose the 30% ROI campaign making $500 a day, see my point?
SO THROW ROI OUT THE WINDOW?
That's not what I'm saying, ROI is still a very important factor, as we always want to have a positive ROI so we are at least making money. As a lot of other things in internet marketing it's always about finding a balance between the profits and the ROI. Finding that sweetspot were you have a positive ROI and tons of profit flowing at the same time.
ANY SPECIFIC ROI % I SHOULD NOT FALL BELOW?
As I mentioned before as long as a positive ROI it's all about finding that sweet spot. I have campaigns today that do 15% ROI, but still making $500 profit a day. It's all about making as much profit as possible.
WHY IS A GREAT ROI SO HARD TO MAINTAIN?
One of the main reasons is when you get a campaign with a great ROI and want to increase volume & traffic you usually have to raise the bid for your costs per click, which in turn cuts into your costs of your ROI. Most of the time unless you have an untapped traffic source, ROI must go down to get more volume so you can generate more profits.
Generating more traffic you must increase the costs of your costs per click, then your ROI goes down, it's a given everytime but you must do this to increase your traffic and profits. The more traffic you have, the more leads you get, the money revenue your generating, the more profits your making, and in the end your ROI goes down, but your making more money.
Another way to get around this is just to duplicate your exact campaign on the same traffic source, more often then not this works, but scaling is tremendously hindered.
You could also try narrow down your targeting, as this will likely decrease your costs per click but again your not going to be able to scale as much.
So my point is in the end, everything in the end will hurt your ROI. You are better off sticking to what you have, taking a decrease in your ROI and increasing your profits.
The best advice I can give you right now, is when you do increase your traffic, increase it slowly and ensure it justifies your loss in ROI. Always ensure your revenue and profits are justified for the loss in your ROI.
FOCUS ON PROFIT AND USE ROI AS A METRIC TO GET YOU THERE
Just to make sure we are all on the same page, let's define ROI. Down below is a simple formula used for any type of business when determining ROI.
ROI tells you whether you have profited or not and how much % your initial investment was.
Let's say you spent $100 on ads, and your ROI is 100%. This means you have spent 100% of your money, plus 100% on top of that which would be your profits.
Example: ($200-$100) / 100 = 1 X 100 = 100 SO YOUR ROI IS 100%
This is the easiest way to calculate and understand what your ROI is.
WHY ROI ISN'T THE MOST IMPORTANT METRIC
It's very easy to get excited about a great ROI %. The higher the ROI the better right? WRONG
ROI is just a simple calculation as I showed you above, let's not get twisted over ROI, because in the end it will hurt maximizing your profits, which is the most important factor we need to be focused on.
Let's be honest we are here to make the most profit that we can. Making $10 for every $1 spent is all fine and dandy and an excellent ROI, but if you keep doing that daily, what's the point you would make $70 a week, 1000% ROI but virtually no profits.
Ask yourself this what would you rather have? A campaign with 30% ROI making $500 a day or a campaign with 1000% ROI making $10 a day? If your here to make money you would choose the 30% ROI campaign making $500 a day, see my point?
SO THROW ROI OUT THE WINDOW?
That's not what I'm saying, ROI is still a very important factor, as we always want to have a positive ROI so we are at least making money. As a lot of other things in internet marketing it's always about finding a balance between the profits and the ROI. Finding that sweetspot were you have a positive ROI and tons of profit flowing at the same time.
ANY SPECIFIC ROI % I SHOULD NOT FALL BELOW?
As I mentioned before as long as a positive ROI it's all about finding that sweet spot. I have campaigns today that do 15% ROI, but still making $500 profit a day. It's all about making as much profit as possible.
WHY IS A GREAT ROI SO HARD TO MAINTAIN?
One of the main reasons is when you get a campaign with a great ROI and want to increase volume & traffic you usually have to raise the bid for your costs per click, which in turn cuts into your costs of your ROI. Most of the time unless you have an untapped traffic source, ROI must go down to get more volume so you can generate more profits.
Generating more traffic you must increase the costs of your costs per click, then your ROI goes down, it's a given everytime but you must do this to increase your traffic and profits. The more traffic you have, the more leads you get, the money revenue your generating, the more profits your making, and in the end your ROI goes down, but your making more money.
Another way to get around this is just to duplicate your exact campaign on the same traffic source, more often then not this works, but scaling is tremendously hindered.
You could also try narrow down your targeting, as this will likely decrease your costs per click but again your not going to be able to scale as much.
So my point is in the end, everything in the end will hurt your ROI. You are better off sticking to what you have, taking a decrease in your ROI and increasing your profits.
The best advice I can give you right now, is when you do increase your traffic, increase it slowly and ensure it justifies your loss in ROI. Always ensure your revenue and profits are justified for the loss in your ROI.
FOCUS ON PROFIT AND USE ROI AS A METRIC TO GET YOU THERE