What is ROI and How to Calculate it [Podcast]

What is ROI and How to Calculate it [Podcast]

Welcome to episode #76 of The PPC Show, where we interview the best and brightest in paid marketing. This week we’re joined by Andrew Breen, the President at Outshine.

In this episode, Andrew discusses what ROI means, how to calculate it, and how to focus your time on the tasks that impact revenue.

Stay tuned as he covers:

  1. Defining ROI and the tools you need to find it
  2. How to calculate ROI
  3. Our job is to let platform do it’s job
  4. Finding the biggest levers to pull that will drive business results

Listen to the Episode

Who is Andrew Breen

Andrew Breen is the President of Outshine, a consultancy that helps B2B companies generate top-line revenue with advertising, analytics and automation.

From start-ups to billion dollar brands, Andrew has spent over a decade working in digital advertising. He helps clients navigate the complexity of the modern advertising and marketing technology landscape, but still loves to roll up his sleeves and build enterprise AdWords accounts from the ground up.

He has been featured in outlets around the world including B2B Growth podcast, PPC Hero, iPullRank and more. Andrew is an AdWords Certified Professional and a Google All-Stars 2015 & 2016 winner, helping Outshine garner its Google Premier Partner status.

Show Notes and Transcript

JD Prater:                     Andrew, welcome to the PPC Show.

Andrew Breen:             Well, thank you so much for having me. I’m really excited to be here.

JD Prater:                     Yeah, man. Well, I know we’re gonna be tackling this fantastic issue of what is ROI, but before we do it Andrew Breen from Outshine, why don’t you go ahead and give us a quick overview of who you are and what is Outshine all about.

Andrew Breen:             Yeah. Thank you so much. So, I think a lot of your listeners, I started by this kind of being in the trenched day-to-day in search query reports, in ad works, in Facebook really looking for opportunities to increase the ROI for my clients. And my clients when I started out were other ad agencies because I had a lot of agency connections, but not a lot of business connections. So, when I started Outshine most of what we were doing was running campaigns for other clients. I’m sorry, for other agencies. So, that was fascinating in that I got to understand at a broad level how do other agencies run adverts and paid media. How do they think about it? How do they track it? And how does it work and how does it not work?

So, for years I was behind the scenes in the trenches day-to-day optimizing campaigns. And thankfully I was smart enough to bring a business partner on who was smart enough to tell me that was a terrible business model. And he was 100% right. So, in the last three years we’ve gotten really client-facing going after our own clients and really focusing on the B2B stats market. A, really it comes down to them knowing their numbers and that we love clients who know the value that we can provide. And B2B stats, they know all the numbers, the LTB, the cap, all that sort of stuff. So, they really know when we’re driving an eagle download or a demo request, how that’s helping move the needle for their business. And that’s what really resonates with me.

I find it hard to get excited when I’m doing … We don’t do a lot of B2C, but if we’re buying Impressions, for example, it just doesn’t get me excited, but conversions in ROI and revenue, that gets me excited. So, I’m happy we’re talking about this.

JD Prater:                     Yeah. Me too. For anyone that’s been following AdStage you can see that we really have focused a lot on the close loop reporting and really showing advertisers basically from click to customer in one report. So, I’m with you man. I love B2B stats. I love ROI. Yeah man.

Andrew Breen:             Awesome.

JD Prater:                     With some of your customers you’re talking B2B. What is ROI to some of them? I know before the show we were talking it’s different for some different companies. Let’s jump into it.

What is ROI in B2B SaaS?

Andrew Breen:             Yeah, absolutely. So, I think it’s really important when you’re starting out with a client and usually multiple stakeholders who might be an executive sponsor, the person you’re working with day-to-day, and maybe their boss. And ROI unfortunately often means different things to different people because it’s not just one set in stone thing of what does ROI mean in an organization. So, for example, someone you see doing traditional advertising, maybe ROI to them is CTRs, is click through rate because to them that’s what’s important. That’s the metric of advertisement quality, but really it shouldn’t be. It should be as close to revenue as you possibly get in our opinion. Now, of course, you can’t always do that perfectly.

So, sometimes you have to use proxies. I think that e-com is a great industry to be in because you live and die by your numbers there, but often time let’s say you’re doing B2B stats and you have a long sales cycle. It’s six to 12 months. Well, it’s not so easy to tie everything back to a hard revenue number and that’s when you come up with these proxies. So, maybe it’s a form fill load is worth X and a demo request is worth Y. Maybe we can’t nail it perfectly. You should try to get as close to the truth as possible, whatever that truth is in your organization. And I think the mistake that people make is that they set a number and they set a goal and they never revisit it. And really the way that you’re tracking it is, unless you’re in e-com and you’re doing revenue, keep coming back to your model and your assumptions and make sure that they’re as close to the truth as possible. And if not, get them closer to the truth.

JD Prater:                     Nice. Yeah. Well, we’re gonna definitely dive into source of truth and what that looks like and how you guys are calculating it, but I want to back up before we get into it. And so, we’re talking about different lead generators and understanding that conversion rate. Whenever you are working with your clients are you guys working with them on so we know our conversion rate for this lead form? And now what is that conversion rate to that next step? Or how far down the funnel are you guys working with them?

How Far Do you Track Metrics Down the Funnel?

Andrew Breen:             Right. So, a lot of times the customers will have that data, but not know how to get it. So, we help them bubble up the truth, but we’re going as far as we can. So, we’re tying in Salesforce data, market data, Bizible data, visible data and really trying to get as close to actual closed one revenue as possible, but a lot of times it isn’t possible. It’s always challenging despite sometimes what thought leaders will say on LinkedIn. This is really hard stuff. And that’s why we have good job security I think because as long as it’s hard trying to get to the truth there will always be a market for that. So, let’s say for a net new client let’s say they don’t know any of these numbers. Well, what we would do is we say “Okay. How many close one opportunities did you have last year? And how many SQLs did you have from that? And how many MQLs?” So, we kind of reverse engineer it.

“How many lead forms did that take? How many people clicking on your ads did that take? How many,” I hate Impression, but “How many Impressions on ads did that take?” So, we try to look back at the model as far as we can. We document what our assumptions are. And then we create a model. And it’s never a perfect model. I don’t negate. And the really valuable thing of capturing that model and the assumptions is that you get the client on board with “Here’s what I think is gonna happen, but I don’t know.” Instead of trying to come in and say “Oh, I can get you an MQL for $100.” Well, what happens if you don’t? You predicted it and you were wrong, but if you come together and you build a model together and you say “Well, I think my conversion rate will be three percent based on the last six months of data and Google Analytics,” that seems like a more informed approach. So, that’s the approach that we try to take with clients.

JD Prater:                     Nice. It kind of reminds me of there’s a quote from Wil Reynolds, the president of Seer. And you’d be amazed at how presenting directional data to clients, how happy they would be with that. I think too many time like you were saying in the beginning, like we’re in the trenches and it’s like “Oh, I can’t say it unless I’m 100% sure.” But, it’s like “Hey, directionally this is what’s gonna happen. If we increase impressions this is what’s gonna happen down funnel.” And I think that’s something we all have to think through and it’s one of those nervous things, but directional data I’m with you on man whenever I’m thinking through ROI.

Andrew Breen:             Yeah. Just the other day I was putting together a model and I had to come up with what I thought the average cost per click would be across all of our stuff. So, I built a weighted model based on some of it was predictions and the average tool, but sometimes I know the tool just isn’t right or my gut tells me this doesn’t line up with my experience. So, you have to be willing to deviate from what the tools might be telling you, but again, tell the client that, if you say “You know what? I think my gut is telling me based on my experience our cost per click is gonna be eight dollar,” they’re gonna be fine with it, but if you don’t say how you got that number and then you prove to be wrong they’ll start questioning you. So, I think the more that you can be upfront about where this number is coming from and why you feel that way, the more buying you get from the clients.

And the buying you get from the clients in the kickoff of the project is so incredibly valuable because one thing that I’ve really learned over the course of my career is that unfortunately being really good at doing paid media often times doesn’t necessarily matter a lot to the client. It’s about how you communicate, how you set expectations, how you respond, how you report. So, being good at paid media is table stakes for what we do. And where you really excel is in the other stuff.

JD Prater:                     100% agree with that one. And I saw that one come really full force with a friend and a previous guest Matt Umbro who’s at Hanapin. And if you ever read any of Matt’s stuff, Matt will always be talking about account management and really the client services side. What makes him such an effective account manager is he is really good with clients, he’s really good at telling it how it is, but also just following it up. So, I couldn’t agree more with that after seeing that in action with Matt.

Andrew Breen:             Yeah. And that was a mistake that I made being behind the scenes for so long was that I thought just being good at paid media meant that I would be a great consultant. And as I got in front and dealing with clients and working with clients I realized “Wait. I was the one who was wrong this whole time. It’s important to be good at your job of course, but there’s so much more to it than just search query reports and bit optimization.”

JD Prater:                     Yeah. That’s for sure. So, whenever you’re … I wanna dive into that. So, let’s talk about different stakeholders and presenting different ROI to different stakeholders. So, whenever you’re going into these meeting how do you position that report or the way that you’re gonna be talking to them? So, maybe a manager versus a director versus VP, CMO kind of level. Do you adjust how you’re gonna go into that meeting?

How Do You Change Reports Based on the Stakeholder

Andrew Breen:             Yeah, absolutely. So, I think, again, the closer you can get to the revenue the more buy in you’ll get, especially the further up you go in the corporate ladder. So, ultimately a CRO or a CMO or a CEO, if they’re using Salesforce they only really care about Salesforce numbers. They don’t care about what Google analytics says. That was another blow to our ego of “Oh, but Google analytics.” They don’t really care. It’s like what does Salesforce tell them. And if Salesforce says this and the analytics says this, Salesforce wins every time. So, you better get good at getting your data into Salesforce so you can take credit for your win ’cause otherwise to them you’re not winning. So, yeah. For the C levels it’s really like “Heres what we spent. Here are the leads. Heres the opportunities or the revenue,” or whatever is important to them.

But, as you get further into the weeds, let’s say you’re working with a digital manager or someone who’s more hands-on keyboard, we’ll get way more into the weeds of Brand Search did this. Competitor Search did this generic remarketing. And that serves them. So, we’ll break it down to the level of interest of the client really ’cause another thing that we’ve made a mistake on in the past is over-reporting. Just pages and pages and pages, stuff that nobody cares about or looks at when really all they want to know is “Should I put more money in Facebook or Ad Words? Or did my new e-book work?”

So, I think the mistake sometimes that we make as marketers is we report on things that matter to us and not the client. So, we’ll have often multiple clients that go one pager to the C level and then for the content team it might be 15 pages of really granular GA data, but you have to know the audience and you have to tailor it appropriately. And the further up the ladder you go, the more concern with revenue it becomes.

JD Prater:                     Yeah, man. Spot on. I love … I’ve done that so many times. I’ve made these mistakes in the agency world of I build up this amazing report just to show that I’ve been effective and that I’m really good at my job and they’re like you’re in this meeting, especially in person, and you get stopped in the middle of a meeting and they’re like “I don’t really care. Can you just tell me this,” but it’s not in your report and you’re just like “Oh, dammit.” Lesson learned. And so, again, you make that mistake once and you learn it for the rest of your life, but whenever you’re bringing it back into ROI I’d love for you to break down the different platforms for us. So, before the show we were really talking about letting the platforms do their work. So, how do you fold in automation into your work so you can really focus on that ROI?

How Do You Fold in Automation into Your Work So You Can Really Focus on that ROI?

Andrew Breen:             Yeah. I think this podcast could probably be labeled mistakes Andrews made over his career. And this is really one of them is we’re talking about letting the platforms of their job and letting them excel. And this was a hard learned lesson for me because I was like an old school Ad Words and old school Ad Words guys as we’re talking about, they just segment everything to hell. And it’s just single key word ad groups broken up my mash types. There’s a time and a place where that made sense and that was successful, but we’re not in that era anymore. And I have realized that and I’ve been switching everything over the last 18 months, but if you’re not there yet and you’re still thinking that you can outsmart Google bit algorithms, you can’t and you will lose that battle. So, what I’ve really seen is that our job as digital marketers is allowing the platforms to do their job when it’s the right time and place.

And I’ll give you an example. The dynamic search campaigns can work really well. They can also waste all of your budget. And knowing when they’re effective and when they’re not is part of our job. And you can test and you can learn over time, but don’t be married to your old school approach because that’s what you were doing before. So, Ad Words it really means switching how you’re doing your ad group structures to go a little more broadly. Putting in more ads is a major change that we see in the last two or three months is it used to be AB test ad one versus ad two and now it’s like well, no. Google can pick what ad is more appropriate based on 3,000 different signals. Put a bunch of different offers in there and let it auto-optimize.

And I only learned that reading other people doing it and we have done it and I can say conclusively that is more successful. It’s working a lot better for us, which is fascinating. On Facebook it’s building conversion campaigns, letting go of what your CPC is. Some of my campaigns I’m spending $20 CPCs and Facebook. And had you said that to me five years ago I would have been disgusted with myself, but the caveat is the conversion rate is 40%. So, I don’t really care what my CPC is ’cause I don’t care what my revenue is and it’s working there.

LinkedIn still has some way to go in terms of its automatic optimization, but I think Facebook and AdWords are absolutely there. It’s not like we’re not quite in the 100% AI thing, but we’re moving towards that. And I think our job is to help our clients succeed with that, aim closer to that.

JD Prater:                     Yeah. A couple of things while on package. 100% agree with especially bit management. I mean, I … In the company that’s doing bit management right now, I just wonder how they’re gonna evolve in two to three years to still be relevant looking at how fast and it’s mostly how fast Facebook and Google are moving with not only their machine learning algorithms, but also with their adoption. Even like you and I, right? 18 months ago we were like “No way, would never do it.” You fast forward just a year and a half and we’re like “Yeah, man. Why spend that time doing that when I could be focused on this part of this lever?” Right? So, 100% agree there.

The second part of that was we had Mark Irvine from Word Stream on and he did a huge analysis on ETA ads and he was basically saying you got to have four to six really in order for Google to spin them, learn from them, know which of those four to six ads it wants to serve to this person. Like you and I might see different ads in the same ad group. It’s because of our buying signal search history and that’s stuff that these third part algorithms just don’t have. So, it’s fascinating. After that PPC show, that was back in December and I’ll link to it in the show notes, I went and made sure every ad group had four to six ads. It was like in editor, add ad, you know? Trying to create new ones.

Andrew Breen:             Yeah.

JD Prater:                     Sorry. No, go ahead.

Automated Bidding

Andrew Breen:             I was gonna say and I think the renaissance to switch over to automated bitting for example, so target CPA or maximized conversion bidding, it comes from a good place in that three years ago a lot of people who were saying “Oh, just do automated bitting,” well, the old school guys were like “Well, you’re just being lazy. You’re not doing your job.” So, I think that people who are still holding on, they feel like they want to, they’re providing a lot of value to their client, but I would actually say like even just run a test and see. If you’re doing better, hey, that’s awesome. And if the time that you’re investing justifies the ROI, all day, but I suspect that is you do an honest tell you’ll find that it doesn’t. And there’s still value that we can provide as consultants and as agencies. You know? Is target CPA bitting right? Is maximized conversion bitting right? It’s still not a clear path to what works best. There’s still a lot of learning to be done. It’s just the learnings we have to as marketers are now different.

JD Prater:                     Yeah, I agree with that. I think it’s just a shift of where your focus and what your time is doing. I don’t think it’s less time or more time unless you’re just doing everything that we’re talking about, but I would say what you said is spot on. It’s just really focusing on the output rather than always just focusing on the input or got to get that quality score up to 10. “Look man, how much revenue did we get,” you know what I mean? Those CMO things. “Hey, our quality score’s an eight.” “I don’t care.”

Andrew Breen:             You know, it’s funny. I don’t ever hear anyone saying this publicly, but I’ll just say it. I find very little correlation between quality score and anything else. Cost per click, conversion rates, none of it. I don’t focus on it. And so, my clients who used to be PPC people will sometimes ask about it and, to your point, it’s like well, does this impact revenue or not? And they’ll say “Well, it leads to a lower cost per click.” And I say “Well, okay. We could try to optimize this by changing a few words in an ad. It’s not gonna have a big impact. Maybe would try adding in a new offer.” There’s different ways you can pull the lever, so to speak, that have much bigger impact than other ones. That’s how we really think about it all. It’s like levers that you can pull. Key word match types are levers. Bitting on different devices are levers, but even like choosing different platforms, they’re all levers that you can pull to get more or less ROI and your job is to figure out what’s the biggest lever I can pull with the least input?

JD Prater:                     Right, right.

Andrew Breen:             Yeah. Sorry. I was talking about quality score and I don’t know. There seems to be a disconnect between quality score and outcomes.

JD Prater:                     Yeah. It would be nice. Well, one of my favorite inputs of the makeup of quality score is landing page and being agency side looking at your clients you’re like “Hey, man. So, can you update that?” They’re like “Well, I gotta put that into a request. Or I’ve got to go submit this.” It was never really that easy or something that I could control I should say. And that was always kind of frustrating, but it is what it is.

Andrew Breen:             Yeah. And especially at large enterprise organization you’re just not gonna win that battle. And you’re not gonna learn when to dig in and what hills to die on. And if you want to change something because you think the quality score might improve, that doesn’t make a great business case.

JD Prater:                     Nice. Well, let’s take the next couple of minutes here and let’s actually dive into ROI. So, one of my big predictions for 2018 is really gonna be ROI. And I think marketers are gonna be kind of forced to really get into actually contribution to pipeline. Right? Especially B2B stats. It’s specifically what we’re talking about. How do you see that shifting overall? ‘Cause I know that you and I are probably on the same page. We get it, but we know that there’s a lot of marketers that are still two years behind. Right? You’re talking about clients that don’t even know their numbers of all this. Where do you see 2018 headed for B2B stats?

Where Do You See 2018 B2B Headed?

Andrew Breen:             Well, I think a lot of people are on the right path and they’re starting to ask the right questions now. The challenge becomes the better questions you ask, the more you realize that your existing data can’t tell you hose answers. So, for example, if you want to understand contribution to pipeline right now, but you don’t have the ability to measure it, well crap. Now you have to start from nothing and start building something up new. So, I think that more people will start asking these questions and fighting the good fight, but also realizing that it’s really challenging. There’s no simple solution to it. There are tools that make it a lot easier. Absolutely. And I think probably one of them, but you can’t just get a tool and do all the work for you. It’s a lot of work and it’s a lot of unknowns. You know?

You need buy in from the top because you’re going to have to invest in some tools to help start pushing you down that path. And it requires a change in mindset because it’s easy to say “Okay, Facebook’s cost per conversion at the front end is five dollars and LinkedIn is $25. Let’s just do Facebook all day.” And 10 years ago I would 100% agree with that. If our Google Analytics form conversion triggers, than that’s good enough, but what we realize now is that, especially in enterprise, not all conversions are equally valuable. So, we need a mechanism to value that. We love ClearBit for that example. We can measure who’s coming from what website and if they’re enterprise or not, that sort of thing, but you have to get some sort of mechanism in place to get you closer to that truth because it’s really hard and Google analytics unfortunately, breaks my heart to say it, it just can’t do it.

And it’s not designed to do it. It’s designed to measure web outcomes. You need something that goes beyond that, especially if you have a sales team.

JD Prater:                     Yeah. And I think the only way you’re gonna get it for all of you die hard GA fans is GA360 with the full attribution and the Salesforce integration that they just launched, but unless you have all of those things and you’re spending hundreds of thousands of dollars to do all those things you’re probably like the majority of us and you’re doing a lot of heavy lifting. It’s a lot of brain power. It hurts. We have a lot of meetings with the sames team even here at AdStage and you’re line by line just going through them. It’s a very manual, tedious process.

Andrew Breen:             Yeah. It’s like time sheets, right? Time sheets such, but they’re really important because they give you really valuable business data that help you make good business decisions. Same thing with Salesforce. It’s like no sales people like doing Salesforce, but again, it gives you some valuable data points to make decisions on marketing attribution, that sort of thing. And even in your example there of GA 360 and optimized and the sales force, I actually don’t think even then it would be as close. I think that … Well, I won’t say much, but it’s still very challenging.

JD Prater:                     Yeah. For sure. It’s a slug. Back what you were saying with sales people, sales people hate Salesforce, but you know what? You have to use Salesforce. It’s just like what you do. And it’s so hard to get you out of it ’cause it’s so sticky and it’s so ingrained into all your work flows that it’s just difficult to get out of. So, kudos to you Salesforce for-

Andrew Breen:             -owning the ecosphere.

JD Prater:                     For sure. But, there are some other good ones. Hubspots out there. It’s up and coming. Definitely the SMB world, that’s a great one. And I know ZOHO is getting better. So, there are some other CRMs who are worth taking a look at. And I know there are a few others trying to disrupt. So, make sure you go take a look at them before you sign that piece of paper for Salesforce.

Andrew Breen:             Yeah, absolutely. But, on the flip side, on the enterprise side no ones every lost a job for recommending Salesforce. They’re the IBM of that space for sure.

JD Prater:                     Yeah. Good point. Good point. Cool man. Yeah. Well, let’s put a bow on this. What are some takeaways here for ROI? So, leave us with a few good nuggets here.

Key Takeaways on Tracking ROI

Andrew Breen:             Yeah, absolutely. So, if you have a CRM in place try to understand how you get the right data into it to help measuring your marketing inputs. It could be as simple as a few big holding buckets that allow you to judge the effectiveness of the overall things that you’re doing. But, if you’re more sophisticated you can start breaking it down by platform and channel and ultimately ad grouping key word, but you don’t have to get there on day one. Have a road map of how you’re gonna get there and work towards it and set the expectation from the outset that is going to be a long slog. It doesn’t happen overnight. And it takes a lot of people’s buying and a lot of people’s effort. But, at the very simple thing is just at the start build a simple model of in the last six months here are the sales, the opportunities, the SQLs, MQLs.

And just work it backwards and then keep working that model over time as you get more inputs and more data and try to make it an engine that you can predict in the future and your predictions get better and better and better. It’ll get more and more and more buy in. Oh, and one more thing. Don’t think about platform data. It’s important to you, but you don’t have tot alk to your bosses about it. Nobody cares about cost per click except us or CTR or any of that. So, help them focus on the right thing by reporting on the right things or as close to the right things as you can get currently.

JD Prater:                     Nice man. All really good points. So, again, we’re talking ROI here with Andrew Breen. He’s at Outshine.com. Go check out the website. Go check him out. Where can the good people find you online?

Andrew Breen:             I spend a lot of time on LinkedIn. I got to give credit to them for building a great platform. So, I’m just Andrew Breen, Outshine, but you should be able to find me with a search.

JD Prater:                     Nice. And I’ll be sure to include a link here in the show notes so you guys can connect with you. So, if you get a bunch of weird connection requests I apologize from a bunch of PPCs.

Andrew Breen:             I look forward to it. Please. I love talking shop.

JD Prater:                     Awesome. Awesome. Well, thanks again man for coming on, really getting into the ROI weeds, especially with B2B stats. It’s such a relevant topic for 2018 and I think you tackled it pretty well man.

Andrew Breen:             Well, thank you so much. I really appreciate the time.

JD Prater:                     Alright. Alright everyone. Thanks again for tuning in to the PPC Show here talking about ROI. We’ll see you all next week. Bye.


JD Prater

JD Prater

JD is the Director of Growth Marketing at AdStage. He’s a savvy marketer, digital strategist, and avid cyclist. A stereotypical coffee snob and recovering Coloradan, he’s a creative thinker who sees the big picture but loves getting lost in the details.

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