No matter what size your company is, your marketing budget is likely never as high as you would like it to be. It’s a precious commodity; your investment into your own company stock. You need it to perform. You need it to help grow your company.
The question is, are you using it effectively? Do you even know if it’s working? In other words, are you needlessly wasting your marketing dollars?
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Earlier this year, Adobe took a closer look at how well companies were doing in measuring the effectiveness of their marketing. It probably comes as no surprise that most of us aren’t doing a great job. Here are couple of staggering statistics Adobe shared:
- Only 8 percent of companies say they can determine ROI from their social media.
- 21 percent of companies consider themselves effective at measuring mobile ROI.
- 40 percent of marketing departments think their companies’ marketing is ineffective.
- 50 percent of B2B companies find it difficult to attribute marketing activity directly to revenue results.
Do you feel the same way? If so, here are some suggestions to help you not only better track the effectiveness of those marketing dollars, but also make a positive impact to your bottom line.
Create a marketing scorecard
One of my favorite adages is, “it’s hard to know if you’ve won the game if you don’t keep score.” Creating a scorecard can be as easy as creating your own Excel spreadsheet, or as elaborate as using marketing dashboards provided through your CRM or conversion software.
Here are is the type of data that you should be tracking:
- General Google Analytics statistics—like unique visitors, time on the site, bounce rate, and source
- Ecommerce statistics—money generated by source, by campaign, by ad, and so on
- Online goal statistics—email submissions and downloads by source, by campaign, by ad
- Phone tracking software, to track people who are viewing your site from their smartphones—by source, by campaign, by ad
- Phone tracking without software—keeping track of queries, and asking not only if they came from your website, but what did they search, did they use Google or Bing? Do they recall if it was an ad or an organic listing?
- Social media—number of followers, number you’re following, number of visits to the site from social media
- Referrals—record the name of the referral not just the word “referral”
- Offline marketing initiatives—if sending to the website, try to use an original url so you can track responsiveness better; if phoning, then see phone tracking above
- Newsletter and other subscribers (like eBook downloads, for example)
- Summarize—number of leads (subscribers), number of inquiries, number moved into nurturing stages (proposals, follow up campaigns), new sales and repeat sales (if tied to marketing and if not, these shouldn’t be included in your marketing ROI except to help you determine the long term value of the client)
This may seem like a lot, but if you invest in setting up your Google analytics properly to track eCommerce conversion, or goals like forms and phone tracking, a lot of the online numbers will be looked after for you.
Set time in your calendar (or an assistant’s, if you have one) to add these in monthly to your scorecard and review the results. Seeing the numbers month to month helps you to make changes more quickly and see where the increases are happening.
Determine how much you are willing to spend
So you have all these great numbers. Now what?
As with any budget, they only work if you have set the guidelines. Here are some goals you should be looking to set.
- Lifetime value of a client. If your business works on long term or repeat customers, marketing should be based on the long term value of the client and not just the first sale.
- Some people prefer to track Gross Revenue, instead of (or along with) the lifetime value of the client. Others track Net Revenue (less Cost of Goods sold) or work off Net Income (less expenses).
- Acquisition Cost of a New Customer. This is the key number that is often overlooked. How much are you willing to spend to acquire a new customer? Some people will spend the entire amount of the first sale because the lifetime value of the customer is very high. Others will use a percentage of the first sale. There is no right or wrong answer here—you can certainly look at your historic information or industry averages to help you decide. But you need to answer this question. It not only helps with measuring ROI, but it is extremely helpful in determining a basic marketing budget (number of new customers in a year times acquisition cost).
- Cost Per Lead. This is important because it helps to compare the costs of each marketing campaign you are running and whether any of them are getting out of hand. This allows you to make revisions quicker before a marketing initiative has a huge impact on your bottom line in a negative way. Typically, this number is determined by taking your acquisition cost of a new customer and dividing it by the average inquiries it takes to close a sale. For example if acquisition cost for a customer is $100, but you believe it takes three leads to close a sale, cost per lead could be set between $30-$35.
- Marketing costs. You will need to determine what you are going to include in your marketing costs. Some people only track actual costs of the campaign. Others include longer term investments like website development or graphic design. Still others include staff time or their own time. Make sure your accounting system is set up to track what you want to include in this expense category. Your accountant may be able to help you determine what you should include.
Measure your ROI
When measuring your return on investment, either measure monthly, quarterly, or semi-annually; depending on the level of marketing activities and sales for your company, you need to have an in-depth look at what is and isn’t producing results.
Here are some suggestions as to what you should be looking at:
Your marketing scorecard:
- Are you seeing overall increases as well as specific increases from one area?
- Are you seeing any anomalies (something has either increased or decreased by a large amount, in which case you’ll want to dig into these)?
- Are you seeing some progress in soft metrics (by these, I mean activities that could have potential down the road—social media followers, visitors to the site, eBook downloads, email subscribers)?
- Are you seeing an increase in leads?
- Where are they coming from?
- Is the cost per lead on track?
- Are the leads converting?
- If leads are converting, which campaign(s) are converting the best?
- How many leads is it taking to convert to a sale?
- If different than what you expected, can you work out the new cost per lead?
- Are you seeing an increase in sales?
- Where are they coming from?
- Is your acquisition cost on track?
- Which campaign(s) have been contributing the most in terms of sales?
- Are these on track?
- Have you spent more or less than expected in any area?
- Where do you want to make changes based on the previous period’s performance?
Does this seem overwhelming? That’s because it is, to some degree.
Of course, for smaller companies, it’s easier to answer these questions than it is for larger companies. However, if you want to be as effective as you can be with that precious marketing budget, then it’s all worth it. The results might even surprise you!
Do you track your return on investment for marketing campaigns? If so, what have you learned from tracking your marketing metrics?