Sometimes having a budget can feel a little like the run-up to bonfire night – the fear of burning your fingers coupled with the excitement of possibilities where quite literally the sky’s the limit. These tips on how to measure the effectiveness of your marketing will put you on track for a campaign that will skyrocket!
Measuring the cost effectiveness of your marketing is an essential part of any business. Without it you don’t have any control over or means of monitoring your marketing spend, and before you know it you could be making very costly and expensive decisions for your business. Imagine getting a bill, not knowing what it was for, paying for it and having no idea if you ever got what you paid for? That is what not measuring your marketing spend and its effectiveness is essentially doing.
Cost effectiveness of marketing is usually measured by and referred to as a “return on marketing investment”. This can be defined as “the product, or result, of a marketing campaign in relation to the money invested in it”. In other words, for every pound you spend, you need to know exactly what you get for it, then you can compare and contrast how well spent your marketing spend was. This metric is critical to understanding whether or not you should keep,change or stop marketing efforts and activities. After all, who has money to waste?
Do the maths…
The biggest sin for any business is the taking approach of “we need some business, so let’s spend money, place an advert that gets our name out there and hope that people like it and sales increase…”
That’s all very well and good and will sometimes work well, but how well? In order to answer that you need to start measuring spend by each channel, each mailing, and each activity by making it track-able. Place a promotional code on your activity and ask the customer to quote it. Then for each order you receive from this advert you can directly attribute the advert to that sale and calculate the cost per order. Have you ever wondered why in many instances at a checkout online you are asked “where have you seen or heard of us”. It is exactly the same principle.
You can then calculate a “cost per order” from different channels, media titles and activity types.
For example, I place an advert in the local paper which costs me £500. 50 orders come as a result of this advert as the customer quotes a unique code to get the offer. Therefore my cost per order is £10. If you did the same in a national newspaper and got 500 orders for your £500 then your cost per order would be £1. Therefore it is clear where to place further investment in the future. Also make sure and measure the spend over a period of time (a campaign) and divide the marketing spend by total orders to give your campaign performance.
Measure the right thing
Using the above example, it shows the importance of tracking and being able to accurately attribute marketing spend. Advertising that simply raises brand awareness by getting your name out there is fantastic to see but the results aren’t so easily measurable so you can’t tell immediately if it worked or not, without some research.
Measure over the right timeframe
With all cost measurement and effectiveness, it has to be determined what the metrics are that you are basing the cost effectiveness on.
For some campaigns it is profitability; it could be the cost per order or it could be the cost per new customer (number of new customers recruited). With new customers especially, it is uncommon to be profitable on a customer’s first offer as they tend to be acquired with an introductory offer. However what needs then to be measured is the longer term revenue from that customer. This is referred to as lifetime value and is used by many businesses to measure cost effectiveness of marketing. I.E. with subsequent revenues, does a customer produce a profit or not in the medium to long term?
Test… repeat… test… repeat
By measuring cost effectiveness it gives you the opportunity to test and measure the difference between activities by changes you make. What I mean by this is that by measuring cost per order of an activity you can make changes to the activity (advert offer, headline, image etc.) and measure the effectiveness of this change. I.E. does the measured metric improve or decrease?
Consider testing variations of your campaign by sending one version to half your list and another to the other half. This is called an AB Test. Use separate promotional codes between the tests to distinguish which version is more effective and in what areas. Eliminate or tweak the less successful version and continuously try new ideas to keep finding better ways to improve efficiency.
At the end of the day, most businesses are in business to make money, so it is imperative to know what you are getting from your marketing spend. The most successful companies are continuously monitoring this using pre-determined metrics and by testing and tweaking their activities to try and find the golden key to improving their performance. Début Marketing can help with this so rest assured you won’t get any more effective use of spend than investing in us to help you, and overall you will get more from your marketing!
So next week I am going to look at the linked topic of campaign continuity. How much is too much when it comes to getting the best results from a campaign…?