Friday, October 20, 2006

Revenue goals VS "budget goals"

Yes this title is quite "bizarre".
I used to not understand :
1. why some companies are most of time destroying value with ROI negatives actions instead of use just ROI positives actions to create value.
2. why they don't want calcul the ROI of each action.
3. why they don't care about it some time...

After one discussion with Guillaume Le dieu de ville (www.ledieudeville.com) i understand better the work problematic of big company managers.

In a start-up, you just can't do ROI negative things... cause you don't have the money. You must monitor hardly the performance to survive.

In a big company you have more tools to do it, but many of web-marketers don't calcul the ROI, they don't control it and by experience it means ROI negative results most of the time.

Now i understand more this fact.
When you're in a big company, the company attributes (annually or quarterly) a budget to each activities (marketing, communication...) in a forecast approach. If the prevision are not relevant or simply wrong, you can't reallocate a part of activity A budget to the activity B. So when, as manager, you have a budget, you're pushed to spend it even if you do ROI negative Job. This because you don't have revenue goals...

I think it's not relevant to work in that way most of the time. First give me revenue goals, let's estimate together the budget we need to achieve them. The dream case is when you've done similar actions in the past with financial performance analysis. Then the ROI objective is known.

One exception : You're launching a new product.
When you need to take the market shares ASAP.
If you got the money, you've got to spend your budget, to deploy your product /service ASAP in order to make profits of your advance against future competitors.
Don't care about ROI in your plan cause you can't know. Make your plan with affinity optimization. Let's test your subjective opinion. Then you'll optimize when you get first results. It doesn't mean you'll not be ROI positive at the end. :)

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