Many businesses don’t seem to consider the effects of their marketing.
They may have a £ budget which makes them feel they are communicating with their market place……but are they?
What are they “spending” their budgets on? What is their target market, their copy and their offer.
There’s an old adage “50% of my marketing budget works…..the problem is I don’t know which 50%!”
The Test and Measure principle hold good here and it’s not too difficult to ascertain the data.
Basically your acquisition cost is the cost of any given marketing campaign, divided by the number who not only responded but who actually bought from you.
Imagine you placed an ad in the newspaper for £200.
You get 20 responses and 10 actually buy something.
Here our acquisition cost is £ £200/10 = £20
The next step is to work out your ALLOWABLE acquisition cost. If your new customers for example are spending £200 with you and leaving more than £20 in profit when they buy from you that £20 is an allowable acquisition cost because the cost of buying the customer is covered in the profit.
So your allowable acquisition cost is more than or equal to that £20 investment you have a good campaign.
Another example: your business invests in Internet marketing. You spend £1,000 for pay per click ads. You plan to get 200 people to fill in a form on your website, so your cost per lead is £5.
If only 10%, or 20 people buy, then your acquisition cost is £1,000/20 or £50. If the customer is spending say £50 on that first purchase you are breaking even, so you’ve got to get them to come back to see any profit from that campaign.
So, the key point here is to know your numbers and set up the appropriate measurements.
Remember, marketing should be treated as an investment not a cost. After all, you’d expect to see a return on an investment wouldn’t you?
