Effective marketing doesn’t have to be cheap, but it does have to be viable.
Viability can be determined by comparing the cost of the marketing against the income it generates. If income is greater than marketing expense + overhead, then the small business has a perpetual money machine: the more money that is poured into marketing, the more money will be generated.
This is the goal. It can be achieved by monitoring a few key statistics. Below is a 5-step plan to improve your marketing results through math geekdom.
1. Calculate Marketing Expense
Add up all marketing expense for the last quarter. Include everything. This can be tricky because there can be hidden expenses easily missed. I’ve included a short list here. If you email me, I’ll send you a PDF with a complete list that you can print off and fill out. In some categories, I’ve included a line for “time.” Calculate how much time is spent on this item overall. Assign it a dollar value that is equal to what you would make if you were producing your product.
- Business Cards
- Letters (printing, postage)
- Other direct mail
Phone book listings
- Website hosting/updates
- Pay per click ads
- Paid listings
- Paid advertising
- Press releases/other
(Dig around – there are many items that can be forgotten. Promotion on the backs of receipts, yard signs, etc)
2. Calculate leads received
This next step demonstrates the value of a good front desk. Add up all leads (not sales) received. How many leads have reached into your organization in the past quarter?
Where did the leads come from? If the information is available, assign the leads to the marketing source above. If not, print off a form with the above list of marketing sources and have your front desk mark it with hash marks as people inquire. Again, I have a PDF of this form if you need it. Just send me an email and I’ll send it to you.
In any case, get the total # of leads received for the quarter.
3. Calculate cost/lead
Divide your marketing spend by the number of leads received, by category of marketing expense and by total spend.
4. Calculate the value of the leads
Add up the total sales volume for each of your leads for the quarter. If multiple purchases were made by the same lead, this is included in the total.
If possible, lead value can be assigned to marketing source. Some sources may result in more qualified prospects – but this information will only be available if it’s been collected.
If you find that you’re getting many more leads than sales, this is worth looking into further. You may find that leads from certain sources don’t result in sales and so are less valuable. You may also find that you have a sieve instead of a sales force!
5. Determine the viability of your marketing
Subtract the cost/lead from the value/lead. Again, if it can be accomplished by category, all the better.
What does this tell you? If the money left over after marketing and overhead is sufficient, your marketing is viable and if you want to increase sales volume, change nothing of your current marketing but increase its volume. You can put your mind at ease about that amazing new marketing opportunity!!!! You have something that works and you don’t need to change a thing.
If your data gathering is very good, you’ll be able to spot where marketing expense is less effective. You can then devote more money to increasing the most effective lead sources – but don’t drop the others, so long as they are viable.
If, on the other hand, you find that the cost of getting a sale is unviable, know that you have a serious marketing problem that needs to be addressed. You’ll need to dig in further and find a method of marketing that did work – that produced viable leads – and get back to doing that fast.
Free marketing tools
I’ve created an easy-to-use checklist that covers the above steps and a thorough checklist of marketing expenses. These items can be used to turn you into a math geek and improve your marketing.
They are free because they have my company logo and phone number on them and I’m hoping you remember me when you need help.
Email me at email@example.com and I’ll send them to you. I won’t give away your email address or anything and I’ll spare you the sales pitch. However, if you use this stuff and it helps you, I’d sure love to hear about it.