Understanding how marketing return on investment (ROI) changes as your business grows is crucial for sustainable success. Many Australian SMEs focus on initial ROI – dollars in for dollars out – but that metric needs to evolve. We see businesses consistently underestimate how marketing efficiency shifts with scale, leading to underinvestment or misallocation of resources. Let’s look at modelling ROI under different growth scenarios.

Initially, when aiming for, say, 20% revenue growth, a simple ROI calculation focusing on direct response – tracking leads and sales directly attributable to campaigns – is effective. However, as you target higher growth, like 50% or more, this becomes limiting. You’ll be investing in brand awareness and market share gains, which have a longer sales cycle and are harder to directly attribute.

Here are a few key insights to consider:

• Customer Lifetime Value (CLTV) becomes paramount: At higher growth stages, acquiring customers is more expensive. Focusing on CLTV – the total revenue a customer generates over their relationship with you – allows you to justify higher customer acquisition costs. Your ROI model needs to incorporate this long-term view.
• Attribution Modelling Evolves: Move beyond last-click attribution. Consider multi-touch attribution, giving credit to all marketing touchpoints a customer interacts with. This provides a more holistic view of campaign effectiveness, especially for complex buyer journeys.
• Marketing Mix Modelling (MMM): For significant growth ambitions, MMM uses statistical analysis to determine the impact of various marketing activities on sales. It’s more complex than simple ROI, but provides valuable insights into optimal budget allocation.
• Incremental ROI is Key: Don’t just look at overall ROI. Calculate the *additional* ROI from increased marketing spend. For example, what’s the ROI of increasing your Google Ads budget by 20%? This helps identify diminishing returns.

Remember, your marketing ROI model isn’t static. It needs to be regularly reviewed and adjusted as your business evolves. Don’t get stuck using a metric that worked when you were a start-up if you’re now aiming for substantial expansion. A robust model, incorporating CLTV and more sophisticated attribution, will ensure your marketing investment fuels sustainable growth.

The next step? We recommend conducting a marketing audit to assess your current ROI tracking and identify areas for improvement. Understanding your baseline is the foundation for accurate forecasting and effective resource allocation.