How Do You Make Sound Marketing Investments $$$?

We all spend money on marketing one way or the other. There are a number of ways to measure the results and a number of measurements to pay attention to. Needless to say, the effects of marketing are difficult to measure with accuracy. The first challenge is that only some marketing efforts can be measured effectively. The second challenge is the timing of when to measure.

Identify Measurable Marketing Programs

The first step in the process of measuring the return investment of marketing is to identify the specific marketing programs that can be measured effectively, the Measurable Marketing Programs (MMP). Start by taking a look at your sales and break out the amounts that can be contributed to specific marketing efforts and those that cannot – the so-called Immeasurable Marketing Programs (IMP).

MMP includes web traffic, clicks, email opens, coupons, telemarketing, TV commercials, exhibiting at tradeshows and others. IMP includes media presence, sponsorships, billboards, visiting trade shows, customer referrals, etc. Residual effects of past MMPs fall under this category as well. In other words, sales from past marketing efforts is not something that be efficiently measured. This process helps you focus on those marketing activities that can be measured and from which meaningful measurements can be obtained.

Measurements for Marketing Programs

Once you have established the MMP, start to look at your data and establish what is meaningful for you.

Spreadsheets are the most obvious ways of looking at numbers. For example, if you exhibited at a trade show that cost $10,000 and at the show, you made 200 new contacts of which 10 ordered your product at a price of $2,000 each, simple math illustrates that each new contact cost you $1,000 and generated $1,000 in net revenue. In traditional financing, the Return On Investment (ROI) from this marketing activity is 100%. ROI= 100% ($2,000- $1,000)/($1,000); Net Profit from an Investment minus Investment Cost divided by Investment Cost.

The challenge with this method is determining how much revenue you got from visitors that you met last year and how much revenue you got from those who saw your name on the list of exhibitors, but never visited your booth. Neither of those questions can be answered with accuracy and therefore we have to use another way of measuring.

An alternative method is the Revenue to Cost Ratio (RCR), a measurement that takes the incremental revenue from a marketing event in relation to the cost of the event. In our example the RCR is 200%: RCR= 200% ($20,000/$10,000); Incremental Revenue/Investment Cost.

The Timing of Measuring the ROI of an Investment in a Marketing Program

In the Portable Storage Industry we know that a customer only rents a container when he needs one and we can’t time our advertising to match that specific moment. Therefore, it is important to have measurable marketing programs; if not, you run the risk of marketing to an audience that isn’t listening at all. One method is to track all marketing activities and time them with sales revenue. A good way to start is with a simple graph showing monthly revenues and the costs of different marketing activities. If you stay disciplined and do this year after year, you will see patterns and from those patterns you can make meaningful decisions.

Below is an example of how one can establish patterns by incorporating and comparing different numbers.

Once you understand what a marketing activity does for you, it becomes easy to start ranking marketing decisions. Should I advertise in the newspaper? Should I pay to do telemarketing? Should I have a Google Pay-Per-Click campaign, etc.?

Measurements of Social Media Marketing

We associate Social Media with Facebook and fun more than business; however, there are some measurements from Social Media to pay attention to and include in your analysis. Keep in mind that Social Media includes just staying in touch via electronic media, but there are offline Social Events that can be measured as well. The good old phone call or a cup of coffee with a customer now and then are other examples.

• Prospect Engagement – Prospects, clients and customers are engaging online via social media; measure the feedback from contacting prospects.
• Prospect Virility Score – Prospects are more or less active online; measure the referrals and the “likes” to establish the validity of your Social Media marketing efforts.
• Search Engine Ranking ROI – When customers consider buying products or services, they go to Online Services. Measure your Service Engine Ranking.

Establish a method to measure the use of your Social Media tools and include those numbers in your analysis.

Conclusion

It is difficult to effectively measure the Return on Investment in marketing programs; some programs can’t even be measured. The measurements vary from ROI methods to those based on total sales. Build a history and compare revenues and costs over time and establish patterns that can be meaningful for decision making. Pay attention to how to measure the effects of social media. Finally, the numbers from different measurements helps you make decisions; however, they should be combined with the personal input of the operator. The numbers only show history and while they may show trends and what will happen in your world today, they should be a supplement to the input from someone who has a feel for the market and the business environment. Therefore, listening, talking, reading and investigating are sound investments you can make when it comes to being able to make financially sound marketing decisions.