In my meetings with business owners, I will often ask if they would hire an employee for £25,000 a year and then never check to see if they accomplished anything or even showed up to work. They usually look at me as if I have three heads, and say “Of course not!” Then I ask why they do just that with their marketing budget. Then I get the ‘aha’ moment from them.
Obviously some marketing budgets are significantly more and others are less, but the principle remains the same. Our marketing expenditures are often determined by what we have done in the past, or what we feel is too expensive. I spoke to a business owner who told me they stopped advertising in the Yellow Pages completely after previously having a full page ad. When I asked why, they said it was too expensive. I asked what type of results they had received, and if they received any type of reporting. The business owner indicated the reporting was excellent, but they were too busy to ever look at the reports.
I’m not promoting one advertising medium over another as they all have their strengths and applications. I am saying that unless you want a £25,000 employee that does not show up, it is imperative that we test and measure the results from our marketing to make informed decisions on what to increase, decrease, add and subtract. Here are a few simple concepts to start the process.
1. Define your purpose for the marketing investment: If the purpose of the marketing is to drive revenues and profits, then the measurements of success need to reflect that. If the purpose is something else, then adjust your measurements accordingly.
2. Track your leads and record the prospect’s data: At the very minimum always ask the prospect some version of “How did you hear about?” Collect their information and put it in a database. The goal is to know how many leads (and ultimately how much profit) per week are coming from each marketing medium and be able to continue to contact those leads. I know from my mystery shopping this is a huge leak in the pipeline for most businesses.
3. Know your key numbers: Marketing is simply a matter of buying clients for less than their lifetime values. Many businesses will not break even until after a new client makes more than two purchases. A chiropractor and a hair salon are two good examples where loyal clients have many transactions over a period of years. The two key numbers are acquisition cost (cost of a new client) and lifetime value (how much the average new client will spend as your client). The key to making marketing an investment is to keep the acquisition cost as low as possible while driving the lifetime value as high as possible. Do you know your numbers?
4. Use the information you collect to make educated decisions: Once we record the information over time, we will know the acquisition cost for each marketing technique as well as the number of new clients driven by each technique. You will likely notice a significant difference in the lifetime value of clients from different techniques. Build the information over time and use it to determine how to allocate your budget.
Obviously there are entire books written about these concepts. The key is to start systematically recording your information now to increase your revenues and build your decision making database.
Whatever you do, make sure you’re getting a great return on your investment from that £25,000 employee
