Do you track and measure your marketing effectiveness? If not, how are you able to determine whether or not your marketing strategies are working? You may just be throwing good money after bad instead of directing your resources into more useful places. It is therefore important to look at last year’s measurements to figure out where you want to go in the future.
First, ponder this quote:
“The man who does not read has no advantage over the man who cannot read.”― Mark Twain
I sometimes talk about how a marketing salesperson may have told you in the past that, “you can’t measure the results of marketing,” but we know that isn’t true. I am suggesting that if you can measure your marketing but don’t, you are no better off than a person who cannot.
Let’s dig in! There are four major measurements you should be tracking for EACH TYPE OF MARKETING SPEND (tv, radio, facebook, etc): ROI, conversion, CPC and CPL. Here are the details (or a reminder) of how to calculate them.
Return on Investment (ROI)
ROI = income / spend on that type of marketing
Take the income from the clients who came to you from the spend, and divide it by the spend. There are a couple ways to calculate the income.
1. For those of you who have good software—and are tracking properly—you can run a report and find all of the clients who came to you from each referral source in the last year. Then, you add up the income from them (what you billed them).
2. For those of you who aren’t able to do this (because of poor tracking in the past or less than stellar software) you’ll need to figure out your average spend per customer over the last year, and multiply that by the number of customers who came to you from the spend (television/radio/Facebook/etc).
Conversion rate = Number of customers you gained this year / Number of leads you had this year
If you determine that you convert 10 percent of your leads into clients, and you know that you need five new clients each month to make money, then you know that you need 50 new leads every month.
Just as importantly, if over time you figure out how to convert your leads into clients at a higher rate, you won’t need to work as hard to chase as many leads. Or you can instead bring in even more clients and grow the business. In the previous example, if you can convert 15 percent of your leads instead of 10, you now get 7.5 new clients for every 50 leads—a huge increase in your monthly client numbers without adding more leads. Dave Lavinsky of Forbes has a number of suggestions on how to increase your conversion rate, such as customer testimonials and compelling headlines online, and getting customer time investments offline.
Cost Per Lead (CPL)
CPL = spend on that type of marketing / Number of leads who came to you from that referral
Which marketing strategies are bringing in leads? Without leads, you have no customers. And some businesses need A LOT of customers! Look at each type of marketing you do and how much you spend on them. For instance, if you spend thousands of dollars on TV ads, but never get a lead from that type of marketing, that investment would be better spent on something that gets you results!
This brings up another point: you need to know how your leads are generated! Whenever you get a lead, you should ask how they learned about you and make a note. This will help you understand where your leads are coming from, what needs extra focus, what needs extra work, and what needs to be abandoned entirely.
Cost Per Customer (CPC)
CPC = spend on that type of marketing / Number of customers who came to you from that referral source
As with your CPL, tracking how many customers you get as a result of each particular type of marketing you do will help give you a clear picture of where you should be directing your resources.
Additionally, if you’re converting leads into clients more successfully through one type of marketing over another, this gives you more information on what is working and what isn’t, which should give you better direction for how to approach your future marketing.
Bringing It All Together
Remember, if you aren’t tracking and measuring, you can’t course-correct and make better decisions in your marketing plan next year. Start tracking EVERYTHING NOW, and make sure your team understands how important it is. Figure out which marketing strategies are working, which ones aren’t, and WHY. This will help you develop strategy going forward, refine what you’re already doing well, eliminate wasted resources, and make your company stronger!
If you feel you are ready to make some positive changes to your business model to get the most out of your company and your life, contact TMH Business Coaching today for a confidential, free, no obligation consultation to propel you forward. Also, please feel free to add yourself to our weekly coaching tips email!