Marketing Channels — Choose your ROI

We have discussed how human actions form online traffic. From a marketing perspective, online traffic is classified into marketing channels, based on the different methods businesses use to promote their products or services to their intended audience. Each marketing channel has unique characteristics that impact its return on investment (ROI).

Here are some common marketing channels and their ROI characteristics. In our discussion, we assess the level of investment needed, the scalability of the channel if more resources are invested, and the ROI potential.

Direct traffic
Investment 0 Scalability ★ ROI ★★★★★

This refers to traffic that comes directly to a website by typing in the URL or using a bookmark. These visitors are already familiar with the brand and require no additional marketing dollars. Woohoo, ROI is the best for direct traffic. Of course, there is a downside. Direct traffic is free-riding on other marketing campaigns so this channel is not scalable. Meaning, you cannot just grow this channel by throwing in more marketing dollars.

Organic traffic
Investment $ Scalability ★★ ROI ★★★★★

This refers to traffic that comes from search engines, social media, or other sources without the need for paid advertising. This traffic is often the result of good search engine optimization (SEO) and building great content on third-party platforms, such as Instagram, Facebook, YouTube, Tik Tok, and blogs. Investments can be made in the form of content development and backlink building. As organic visitors often come with a clear demand and stronger conversion intentions, the ROI of this channel is normally higher than the other push channels.

However, the growth of this channel depends heavily on the quality and frequency of the content, as well as the distribution algorithm on the platform where the content is posted. While it is possible to achieve viral success overnight, it is more likely to take time and consistent effort to see significant growth.

Referral traffic
Investment $$ Scalability ★★★ ROI ★★★★★

Referrals can come from your customers, suppliers, and other industry participants. Satisfied customers refer their friends, family, or acquaintances to your product and service, and this is normally highly effective in long-term conversion as customers trust recommendations from people they know. Brands should build a mechanism or incentive system to encourage customers to share their positive experiences with others. This incentive system should be treated as your marketing investment.

Both PayPal and DropBox are successful examples of referral marketing. Read more here: The Paypal referral program: Getting to 100M users. Dropbox grew 3900% with a simple referral program. Here’s how!

I have seen many working referral programs. It might be difficult to scale at the beginning, but a well-designed referral program will constantly bring streams of satisfied customers, eventually becoming a significant marketing channel for your business.

CRM traffic
Investment $ Scalability ★★ ROI ★★★★

CRM channel in digital marketing is to reach out to leads and customers at any possible point in time, any possible communication channels, at the right frequency. Beyond the traditional emails and physical letters, there are other ways to reach out to your customers such as app push notifications, SMS, Whatsapp business account, Messengers, AI chatbots, etc. All of the communication channels should be part of a holistic CRM program to optimize your chance of reaching a customer. Technically, traffic is free here. Just pay for the platform cost of sending an email or chat message.

CRM messages can be split into ad-hoc communication (i.e. newsletters, product launches, special promos), and journeys (also called loops/drips). To maintain the effectiveness of this channel, it’s important to strike a balance with the frequency of messages. Avoid bombarding your customers with too many messages that can lead to annoyance and opt-outs. In my experience, for the digital natives, concise and direct WhatsApp messages have garnered more positive feedback compared to emails.

A key aspect of successful messaging is timing — sending messages when they can add the most value to your customers. This may include reminder messages for upcoming appointments, personalized promos when products are due for renewal or service, or a series of messages to guide customers through lengthy financial product onboarding journeys.

Affiliates traffic
Investment $$ Scalability ★★★ ROI ★★★★

This refers to traffic that is generated through affiliate marketing programs, where other websites promote a business in exchange for a fixed or variable commission. This is also known as the Cost Per Action (CPA) model. Marketplace platforms exist to connect publishers and advertisers, simplifying the process of posting assignments for advertisers and selecting jobs for publishers.

The commission model in the affiliate channel often guarantees a good ROI. However, there is a risk of fraud from rogue publishers creating fraudulent transactions. This risk factor causes a mark deduction in the ROI for the affiliate channel.

Influencers traffic
Investment $$$ Scalability ★★★★ ROI ★★★

Influencers are not only about celebrities. Influencers are characterized by their capacity to influence purchasing decisions more effectively than others. Investing in influencers can accelerate the process of building trust with their followers, acting as a catalyst for your brand’s credibility and reputation. To scale this channel, either invest in larger and more popular influencers, or invest in a greater number of influencers.

It’s worth noting that the content created by influencers may also spill over into your organic social profiles, contributing to the growth of your social media channels without any additional effort or cost.

Paid traffic
Investment $$$$ Scalability ★★★★★ ROI ★★

This refers to traffic that is generated through paid advertising campaigns. Simply pump in media spend with the paid marketing platforms and they will direct their traffic to your side. The cost of traffic is often measured by CPM and CPC. Sitting on their billions of users, paid marketing channels are highly scalable. Just spend more money.

Paid marketing is also the most scientific marketing channel, with thousands of engineers working on algorithmic models to predict actions and optimize results. Digital markets can optimize campaign performance by playing with 1) ad text, 2) creative, 3) audience targeting,4) bidding model or campaign objective, 5) call to action, 6) landing page.

You might already know this, but I am listing them down anyway to complete this section. Examples of paid traffic include search engine marketing (SEM), display ads, social media ads, and sponsored content. Major paid platforms include Google, Meta, Tik Tok, YouTube, Spotify, Criteo, Taboola, etc.

Offline-to-online traffic
Investment $$$$$ Scalability ★★★ ROI ★

Marketers have seen increasing costs of traffic in recent years, measured by CPM and CPC. It’s driven by intensified competition with more online businesses, as well as lower engagement caused by advertising fatigue.

As such, digital marketers are also exploring offline advertising spaces, from billboards, and bus body ads, to pop-up stores. The return, however, is intangible most of the time. Offline presence can create a sense of security and trust for the brand, as the word says, seeing is believing. This trust cascades down to every level in the conversion funnel, uplifting overall conversion rates.

I have heard customers complimenting the offline ads and pop-up stores after seeing them. The physical presence has connected the dots, including building trust between the brand and the customer. On the other hand, the measurement of trust is highly subjective, lacking a definitive methodology for quantitative measurement. Thus, the immediate ROI for the offline channel is low and the long-term ROI is uncertain.

Two sets of metrics are commonly measured: eyeballs and actions. 1) Eyeballs refer to the number of unique visitors who have seen the ad or been in the physical space, normally measured using cameras or Bluetooth beacons. 2) Actions refer to immediate actions taken after seeing the ad, it can be a QR code scan or a NFC scan. They help customers continue their offline journey to the online space.