How Do We Gain Value From Internet Marketing?

We are often asked: "What return on investment can I expect from my internet marketing?" The answer to that question is different for every business and depends in the short run on the value and contribution margin from your average transaction and in the long run on your average customer value. As you will recognize, these numbers require a deeper look at your business and some calculation. But before you do that you’ll want to take a look at the actual sources of the values that drive these numbers.

There are several factors that create value for your business from internet marketing. These factors have an impact on all internet marketing tactics, whether you are conducting email campaigns, search advertising, other more general internet ads, email newsletters, or search optimization to draw more relevant internet customer traffic.

1. Direct immediate sales. The first and most obvious source is the margin earned from any direct sales that are produced by someone receiving a email promotion or newsletter from you, or by finding you through a search engine. This is the factor that most marketers focus on most heavily because it has immediacy to it; we can see the result quickly (perhaps in days or at most several weeks) and tie it to an offer in a number of ways. Although this is the most recognized gain, it is not the only source of value and is not even the biggest potential value creator for the seller. Read on to learn more.

2. Deepening the customer relationship. The second source of value for your ROI is the opportunity to do more business with a current customer on products or services beyond their original interest. A golf equipment seller may have initially sold someone a set of drivers, but that same person may also need new golf shoes or a golf bag in a few months. Or perhaps they would be interested in a golf vacation, or golf lessons?

3. Lengthening the customer relationship. All customers have value and the most expensive thing any business does it to acquire a new customer. Because of this you become significantly more profitable the longer you are able to keep them as a customer. That extension of value is the source of strong ROI and it is the reason companies that draw a stream of continual income from customers, like telephone and financial service companies, can afford to be very aggressive to keep your business.

4. Reaching new customers through referrals. In many product categories research shows that the most common way people find out about a product or service they eventually buy (we said buy, not merely hear about on an ad) is through a conversation with a trusted friend, i.e. a referral. Unlike making another sale to an existing customer, when you gain a customer through a referral, you have gained the entire value they will contribute throughout the length of their relationship with you (customer life). That’s a much bigger number than just making a sale, so referrals are often the highest ROI contributor among all the factors. There is also a nice cost benefit from referrals - they are free. You paid to reach the first customer, but the referral gain cost you nothing.


This of course is just the briefest of looks at the subject of how to create economic gain from internet marketing. We hope this starts you thinking about your own marketing efforts and of course would be pleased to speak with you directly if we can help you analyze your strategies and develop marketing and communication programs to meet your economic goals.