Return on Investment, often abbreviated as ROI, is a critical metric in the business world. It offers a snapshot of the profitability of an investment, providing insights into whether funds invested in marketing campaigns yield a significant return. High ROI percentages suggest that the investment gains compare favorably to its cost.
Example 1: Bonus Bucks
Rainbow Gardens has been using bonus bucks for years. Their campaign is straightforward: customers earned $1 in bonus bucks for every $10 spent. In the example of Rainbow Gardens (page 9) the initial press run was $907,800 in bucks. This would support nearly $10 million in sales. They have multiple locations.
In Rainbow Gardens’ experience 20% of these bucks were redeemed (in August, in Texas), generating sales of $181,560. Customers could redeem them for up to 50% of the purchase amount So the net after printing costs of $6945 = $83,835, was a whopping 1207%, or a 12 times ROI.
Example 2: Customer Loyalty App
In another strategy, through their customer loyalty app the garden center offered a discount of $10 after five shopping trips to its 1,500-app customers. If these customers spent $45 each trip (the garden center’s average sale), in our example sales would total $337,500. With an advertising cost of $3,600, the ROI calculations varied based on redemption rates. If all customers availed the discount, the ROI would be 8,858%. However, a more conservative estimate, where only 30% redeemed, still yielded an impressive ROI of 2,587.5%-, or 25-times cost.
Example 3: PetalPost
Kevin Meakim from the Flower Station, a PA IGC, shared his results on his latest mailer (see page 15). With a 17.5% rate of return his mailer generated sales of $92,084. After deducting the cost of the mailer, and discount, their ROI on the mailer was 773.5%, or nearly 8 times return on investment.
Why are these ROIs Significant?
These examples are potent because they highlight the potential of well-thought-out promotions. The initial costs, be it the printing cost for bonus bucks or the subscription cost of the app, were dwarfed by the returns. Such high ROIs not only showcase the effectiveness of the strategies but also underscore the value of retaining customers and encouraging repeated patronage.
ROI is more than just a metric—it’s a storyteller. It quantifies the success of investments and helps businesses refine their strategies. As the garden center examples reveal, even simple promotional strategies can yield impressive returns, validating the power and importance of ROI in decision-making.