Your e-letter is pulling in plenty of new subscribers, your website is attracting more traffic, and you are selling tons of products via other companies’ newsletters. In fact, your return on investment (ROI) is well over 100 percent.

But your profits could be in serious trouble…

Fortunately, there’s an easy way to protect yourself and your company.

MaryEllen Tribby, ETR’s CEO and Publisher, has told our marketing team time and again: “When it comes to making money, ROI is the only number that really matters.”

And that’s true.

But today’s ROI is probably a lot different from what your ROI will be down the road. If you look at your ROI today, you’re only seeing your gross return. But what counts at the end of the year is your net ROI – what you have after all your cancellations, refunds, and marketing costs are in.

So you need to apply a little fortunetelling here…

“You should always know your averages,” MaryEllen told our marketing team. “And one of the most important averages to keep in mind is your average cancellation rate.”

If you know your average cancellation rate, you can figure it into your preliminary ROI. It won’t be exact – some months, more people will ask for refunds than other months. But it will give you a good idea of what your net ROI will look like.

Same holds true with media and mailing costs. Some months you might be in the mail more than others. And some months you may be more aggressive with online media buying (i.e., banner ads, e-mail list rentals, e-newsletter ads). Many variables outside your control will affect those tactical decisions – promotion performance, seasonality, product demand, and consumer behavior, for example.

But if you know, on average, how much your standard online monthly media cost is, what your typical direct-mail costs are (which would include list rental, print, production, and postage), as well as how often you plan to be in the mail – you can forecast your anticipated net ROI for each marketing effort. And if you anticipate a low ROI – i.e., under 100 percent – you know that you should be supercharging your marketing efforts.

[Ed. Note: MaryEllen Tribby and Michael Masterson have teamed up to write Changing the Channel: 12 Easy Ways to Make Millions for Your Business. Now you can benefit from their 60+ years of experience in growing businesses. You can read the book in an afternoon, and the 12 multimillion-dollar ideas you’ll find inside could help you take your business to new heights.]
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