How much do you spend on marketing each year? What do you allow in your budget and how do you decide where to invest that cash?
Some Business Owners seem to feel that spending money on marketing is like rolling pound coins down a drain. They just can’t figure out whether it’s worth it or not. Somehow they feel they should be marketing but on the other hand they’re not sure it’s cost effective.
So how do we change that feeling? How can we be sure that the money going into marketing is an investment (More comes in that goes out) and not an expense.
Let me ask you a question…… If I gave you the opportunity to give me £1,000 and then immediately I gave you £10,000 in return. How many times and how frequently would you give me £1,000 if you always got the same response? Now turn this to your marketing, if you find a strategy where you invest £1,000 in marketing and you get £10,000 in bottom line profit, what is your marketing budget now? UNLIMITED!
There are some key measures that we must have in place for any marketing campaign. Let’s for example start with say a flyer drop, door to door on a local housing estate. The printing costs were £100 for 1000 leaflets and it cost £200 to have someone deliver them. We’ve now spent £300, what do we need to know to judge if this is worthwhile?
The first question we should ask any new prospect that shows an interest in our product / service is…. ‘Where did you hear about us?’ If we don’t do this, we can’t measure how effective the flyer drop was in getting people to contact us. In this example 30 people say.. ‘the flyer drop’ = 3%. The next measure we need is, of the 30 people, how many actually bought from us? This will be our conversion rate. In this example say 12 people buy…. Our conversion rate is 40%. We then need to know on average how much they spent. So in this example, let’s say = £250. Therefore the total sales will be 12 * £250 = £3000. Now if our margin is 15% then the bottom line profit on those sales is £3000 * 15% = £450.
So now we have a strategy that if we invest £300 in the flyer drop marketing campaign we get £450 back in bottom line profit. What could we now do with the £450? Yes, invest in a 1500 leaflet drop campaign and make a bottom line profit of £675 and so on………
These are just some of the very basics of Key Performance Indicators (KPI’s) that we need to understand in any marketing campaign. Others include things such as , number of times that customer comes back, lifetime value, number of referrals gained from that client etc. But to start, keep it simple and measure as a minimum these numbers.
- Cost of campaign
- Number of leads generated
- Conversion rate to sales
- Average sales value
- Bottom line profit generated
Turn your marketing into an investment by knowing your KPI’s!