Invest, not spend, on your marketing
The chances are, if you’re not testing and measuring your marketing, you’ll end up spending (rather than investing) money on marketing. This is likely to limit your business growth and have serious implications for profit and cashflow in your business.
When testing and measuring, you’re essentially looking to find out which of your marketing activities make more money than you spend on them. Simples!
Armed with this information you can then make decisions about which marketing activities you want to: stop; change and re-test; or, most importantly, which ones to continue to invest in.
What do you need to measure?
There are just three things you need to measure:
- How much money each of your marketing activities costs. Depending on the specific marketing activity, costs might include design costs, advert placement (print, online), internal staff costs, external marketing resources (agency, contractors) and printing.
- How many leads each of your marketing activities generate. Use this to calculate your ‘cost per lead’ for each marketing activity by dividing your marketing spend for that activity by the number of new leads it generated.
- How many sales each of your marketing activity generate. Use this to calculate your ‘customer acquisition cost’ by dividing your marketing spend for the specific marketing activity by the number of new customers you acquired from that activity.
How to test and measure in practice
The fundamental question you’ll need to answer for each and every enquiry or lead that you generate is ‘how did you hear about us?’.
There are a number of ways that you can do this. Examples include:
- Have a tally sheet by the phone or computer to record the name of the enquirer and how they heard about you.
- Update your opportunities register or sales pipeline spreadsheet to record which marketing activity generated the opportunity or lead.
- Use (or add) a mandatory field in your CRM or other business management system so that your team must record the source of the enquiry as it comes in.
Whichever approach you use to tracking the source of your enquiries and leads, you’ll also need to devise a way of tracking how many of those leads turn into actual sales.
You can start testing and measuring at any point in your business. And if you’re starting new marketing in order to grow your business, then this is a particularly good time to get a simple system in place to measure your marketing results.
Taking it to the next level
When your marketing generates more profit than the money you invest in running it, then you’ll have effectively created an unlimited marketing budget for your business.
And you do this by continually measuring and reviewing the financial performance of each of your different marketing activities.