For Advertising, a Positive ROI is a Condition To Play, Brand Growth Requires More Creativity

Advertising ROI is a bit of a weird metric: finance folks love it, while marketing teams often view it as a necessary evil. Despite this, it's become somewhat of an obsession for everyone in the industry.

Don't get me wrong—I'm not here to diminish the importance of ROI or media efficiency. They're crucial in steering the brand towards sustainable growth. However, I'm making the case that effectiveness holds a more significant role in the brand's growth journey. This approach can keep your CFO's eyebrows unraised, focusing on brand growth rather than just trimming costs.

Positive ROI Is a Condition To Play

Think of a positive advertising ROI like the entry fee to the advertising world—it's like the minimum bet at a casino table. Despite this, many still fall into the trap of thinking that achieving ROI is the end of the discussion.

Let's take, for example, the world-renowned "cheapest media" trophy holder: the standard display banner. You know, the one that's universally ignored, ad-blocked, or even not seen hiding below the fold. Despite their affordability, these banners can sometimes hit the break-even point on ROI by converting an incredibly small number of customers. Now, compare this to the high-quality online videos—sure, they're pricier, but they can convert customers at a rate often 10x higher than display banners. But, if the cost is exactly 10x higher, both routes offer the same ROI.

Which would you choose?

The answer is clear to me: go where the largest conversion—or sales impact—is. A higher conversion rate is a fast track to brand growth. You could inch your brand forward with display banners, but it's like comparing a sprint to a marathon, with too many hurdles to clear. And let's not even start on the pitfalls like ad fraud, ad blocking, and erroneous clicks.

Marketing ROI During Downturns

ROI mirrors the performance of your creative assets against your media cost. In the tumultuous year of 2020, the COVID-19 crisis led to many advertisers pulling back on digital spending, which in turn caused a significant drop in CPMs on major platforms. This situation created a facade of artificially improved ROIs. Did consumer behavior towards ads change? Unlikely. Is your ROI fluctuating due to market forces out of your hands? Quite possibly. That's why prioritizing effectiveness offers a more consumer-focused strategy.

The Struggle of Small Brands with Marketing ROI

For brands that are just starting out, dreaming of a positive short-term ROI is like chasing rainbows. The viable strategy? Maximize conversion and, over time, achieve a commendable ROI through sustained sales. Focusing solely on short-term ROI might paint a bleak picture for investing in small but promising brands, leading finance to cut off funding prematurely. However, investing in creative excellence and fostering a culture of innovation (much like McDonald's recent approach) is far more important than one might assume.

In a nutshell, while ROI is an essential marker of success, but it's the broader impact on brand growth and consumer engagement that truly defines marketing effectiveness.