It’s time to change how you measure success
Your company’s one metric that matters (OMTM) shouldn’t be return on investment (ROI), return on ad spend (ROAS), net promoter score (NPS), brand affinity or one of the other sophisticated-sounding acronyms marketers use to gauge success.
Your company’s one metric that matters should be long-term profitability.
Put another way, your business should be singularly focused on how much money it can return to its owners, investors and shareholders. Sounds obvious, right?
You’d be surprised: A majority of Fortune 500 and Silicon Valley startup marketing budgets aren’t optimized for long-term profitability.
Instead, budgets are often optimized for secondary or upper-funnel metrics. Besides tracking ROI, ROAS, NPS and brand affinity, many marketers monitor key performance indicators (KPI) like net revenue, customer acquisition cost (CAC), cost per thousand (CPM) and brand recall — none of which directly correlate with long-term profitability.
In fact, many brands’ marketing departments frequently omit the word “profit” all together from the line items and KPIs in their monthly performance reports.
A good way to think about the futility of the KPI status quo is the following fictional scenario, which reflects the marketing and advertising playbooks of a shockingly large segment of American businesses: Main Street Shoes spends $100 on a Facebook ad campaign to promote a new line of sneakers to Jack and Andrew. As a result of the retailer’s Facebook ad campaign, Jack and Andrew each spend $100 to buy new sneakers.