{"id":77145,"date":"2019-05-16T00:00:00","date_gmt":"2019-05-16T04:00:00","guid":{"rendered":"https:\/\/marketinginsidergroup.com\/uncategorized\/agile-marketing-roi-compound-interest\/"},"modified":"2023-09-14T05:36:55","modified_gmt":"2023-09-14T09:36:55","slug":"agile-marketing-roi-compound-interest","status":"publish","type":"post","link":"https:\/\/marketinginsidergroup.com\/agile-marketing\/agile-marketing-roi-compound-interest\/","title":{"rendered":"How to Prove Agile Marketing ROI Using the Power of Compound Interest"},"content":{"rendered":"

For years our customers have been telling us that using Agile marketing to learn fast, spend wisely, and optimize marketing campaigns has transformed their business. And the benefits don\u2019t just come from our personal experience: a study conducted by MIT suggests that Agile firms grow revenue 37 percent faster<\/a> and generate 30 percent higher profits than non-Agile organizations.<\/p>\n

There are three simple metrics you could use today to measure Agile marketing success<\/a> at the process level, which is a crucial step in optimizing operations. But what about all the time needed to train people and implement technology so operations can actually be <\/i>optimized?<\/p>\n

In other words, how do you prove the ROI of Agile marketing?<\/p>\n

In this blog post, we will have some fun with basic math. Don\u2019t worry \u2014 there\u2019s no algebra or trig ahead. We\u2019ll simply be using the power of compound interest to prove Agile marketing ROI to your boss.<\/p>\n

The Mandate for Agile Marketing<\/b><\/h3>\n

\u201cIt\u2019s not one high-level decision each year around marketing mix that makes or breaks us. It is the million little optimizations that we will make all year long that means the difference between success and failure of our marketing\u201d \u2013 CMO of a global tech company<\/p><\/blockquote>\n

Let\u2019s demonstrate the logic behind this CMO quote using something simple from your day to day life. If you do some basic money management for your household, then you\u2019re already familiar with the concept of simple versus compound interest.<\/p>\n

Simple interest is based on the principal amount of a deposit, while compound interest is based on the principal amount and the interest that accumulates on it in every period.<\/p>\n

When you earn interest on savings, that interest then earns interest on itself and this amount is compounded monthly. The higher the interest, the faster your money grows!<\/p>\n

Traditional Marketing Looks a Lot Like Simple Interest<\/b><\/h3>\n

If your team is still doing traditional marketing, where you use annual year-in-review, \u201chind-sighting\u201d decks or post campaign wrap-up reports from your agency to run annual mix models to help reallocate spend, then your marketing ROI looks a lot like simple interest.<\/p>\n

Let\u2019s say you start with a $10 million marketing budget. You spend it, and then the next year you think, \u201cHey, I think we can get a little bit better\u201d and get a little bit more budget. Then next year you review again, and so forth and so on. In this cycle you\u2019re just getting simple interest.<\/p>\n

\n

\"AgileMarketing<\/p>\n<\/div>\n

However, if your marketing team can commit to the continuous course corrections that Agile marketing represents, then the benefits start building on themselves.<\/p>\n

Agile Marketing Works Like Compound Interest<\/strong><\/h3>\n

This is where you really unlock the power of compound interest. If you\u2019re committed to ongoing agility and ongoing optimization, you can actually get much more out of your marketing dollars.<\/p>\n

\n

\"AgileMarketing<\/p>\n<\/div>\n

Let me explain this concept using the formula of compound interest calculation:<\/p>\n

\n

\"AgileMarketing<\/p>\n<\/div>\n

P = present value<\/strong> (the amount of money you have available)<\/p>\n

i = interest rate<\/strong> (how much improvement you think you can get)<\/p>\n

n = length of time<\/strong><\/p>\n

c = compounding interval<\/strong> (are you doing this once a year? multiple times per year?)<\/p>\n

FV = future value<\/strong> (your outcome)<\/p>\n

The Agile Marketing ROI Formula<\/strong><\/h3>\n

Here’s the marketing parallel you should use to demonstrate the ROI on Agile marketing:<\/p>\n

\n

\"AgileMarketing<\/p>\n<\/div>\n

P = Present Value of Your Marketing Dollars <\/b><\/p>\n

How much are you committing to Agile marketing? Is it your whole marketing budget, or are you just devoting a little piece of your marketing spend to the Agile experiment? Whatever the amount of your marketing spend that you\u2019re willing to optimize is your P value.<\/p>\n

I = The Improvement \u00a0<\/b>
\n<\/b>What improvement you think you can realistically get on reach, engagement, leads conversion etc.?\u00a0 Here you can use an industry benchmark, or even better your own historic data, if you have it, to hypothesize.<\/p>\n

N = Length of Agile Marketing Optimization<\/b>
\nHow long will you commit to Agile marketing optimization? If you\u2019re just doing a three-month pilot, then you can\u2019t expect to see much change to your budget during that time (even though you\u2019ll likely learn a lot about your Agile process).<\/p>\n

On the other hand, if your team is embarking on an Agile marketing transformation for the next few years, you have a much longer time horizon to enjoy the benefits of compounding optimization.<\/p>\n

C = Frequency <\/b><\/p>\n

The C represents the compounding interval, or how frequently you\u2019ll act and optimize your spend each year. If you only optimize annually, then your C=1.<\/p>\n

However, let\u2019s say you\u2019re running two-week marketing Sprints, which you\u2019re then using to measure and optimize, your C=26! The higher you can push your optimization frequency, the better your Agile marketing ROI.<\/p>\n

FV = Effective Marketing Spend<\/b><\/p>\n

The results of this formula essentially quantify how much farther your marketing budget will go after your recurring Agile optimizations.<\/p>\n

This is the potential value of your usual marketing spend after running Agile marketing for the allotted time period.<\/p>\n

A Tale of Two Marketing Teams<\/b><\/h3>\n

Now that you understand how to prove Agile marketing ROI using compound interest calculation, let\u2019s put the formula to work.<\/p>\n

In our example below both Team A (Traditional Marketing) and Team B (Agile Marketing) have the same $1 million content marketing budget (p) and expect the same 20% lift (i) via Conversion Rate Optimization (CRO).<\/p>\n

However, Team A is only committed to a 3 month pilot (n) while Team B is embarking on a 2 year commitment to Agile marketing.<\/p>\n

Team A gets to optimize its content once a year (c), while Team B is running on two weeks Sprint and optimizes its copy, images, calls-to-action etc. every two weeks using Agile marketing measurement.<\/p>\n

As you can see, Team B gets 10x the ROI (FV) on their content marketing budget using Agile marketing compared to Team A still on traditional marketing.<\/p>\n\n\n\n\n\n\n\n\n\n
<\/td>\nTeam A <\/b>
\n<\/b>Traditional Marketing<\/b><\/td>\n		Team B<\/b>
\n<\/b>Agile Marketing<\/b><\/td>\n<\/tr>\n
P = Content Marketing Budget<\/td>\n$1,000,000<\/td>\n$1,000,000<\/td>\n<\/tr>\n
I = Conversion Rate Optimization<\/td>\n20 (%)<\/td>\n20 (%)<\/td>\n<\/tr>\n
N = Length of Optimization<\/td>\n0.25 (3mo Pilot)<\/td>\n2 (2yr Commitment)<\/td>\n<\/tr>\n
C = Frequency of Action<\/td>\n1 (Annual Optimization)<\/td>\n26 (Bi-weekly Sprints)<\/td>\n<\/tr>\n
FV = Effective Value<\/td>\n$1,046,635<\/td>\n$1,489,543<\/td>\n<\/tr>\n
ROI<\/b><\/td>\n4.6%<\/strong><\/td>\n48.9%<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Using Agile marketing allows you to enjoy compound interest on your marketing budget, rather than relegate your optimization efforts to an annual planning event.<\/p>\n

If you\u2019d like to play with the numbers yourself, here is a simple Agile Marketing ROI Calculator<\/a> you can use.<\/p>\n

The post How to Prove Agile Marketing ROI Using The Power of Compound Interest<\/a> appeared first on AgileSherpas.com.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

For years our customers have been telling us that using Agile marketing to learn fast, spend wisely, and optimize marketing campaigns has transformed their business. And the benefits don\u2019t just come from our personal experience: a study conducted by MIT suggests that Agile firms grow revenue 37 percent faster and generate 30 percent higher profits […]<\/p>\n","protected":false},"author":6,"featured_media":77151,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[20],"tags":[],"class_list":["post-77145","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-agile-marketing"],"acf":[],"yoast_head":"\nHow to Prove Agile Marketing ROI Using the Power of Compound Interest - Marketing Insider Group<\/title>\n<meta name=\"description\" content=\"Agile Marketing can deliver ROI up to 10x that of traditional marketing by working like compound interest compared to simple interest.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/marketinginsidergroup.com\/agile-marketing\/agile-marketing-roi-compound-interest\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Prove Agile Marketing ROI Using the Power of Compound Interest - 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