Today Virtually Every Marketing Expense Should Be Tracked to Generate an ROI
As we approach mid-year and the summer lull, when vacations and good weather slow things down, it is a good time to step back and look at how your marketing plan is doing and make some adjustments. No matter how mature your company is it is likely you need to do this each quarter or at least twice a year.
In decades past companies spent 5% to 10% of revenue on marketing. Today in many industries this is more likely to be 20% to 30% of revenue especially when you include staff time. It used to be that advertising people could sell their wares based on “building image, awareness and brand”, some still try but even in consumer markets this is a disappearing phenomenon. Today each marketing expenditure should be tracked to actual sales as closely as possible. This does not mean that every sale can be traced to a single marketing expense. There are always some untraceable sales that are due to the cumulative effect of many things or because the customer can not remember where they heard about your business.
Here are some rules to live by when making marketing decisions today:
1. If You Can’t Track It Don’t Buy It – If you can’t measure a method then don’t spend money on it. This does not always mean precisely, as few things are 100% trackable but you must be able to see a boost in sales as a direct result. Use different landing pages, 800 numbers and other methods to insure at least relative measurement.
2. Repeat the Message to the Same People – It is almost always better to hit the same people 7 to 10 times than ten times as many people once. Generally exposures, or impressions, must get over five and ideally seven or more before people recognize and respond to your name or brand. This requires some real discipline as many people will quit too early and move on when response is slow at first. This just creates a never-ending cycle of low performance campaigns because none reach enough frequency to be effective.
3. Compare ROI Across Tactics – Look at the cost per thousand (CPM) impressions and cost per sale as comparisons across different tactics and media. Obviously some impressions (video) are worth more than others (small print ad) for many products and you are not comparing apples to apples but this at least gives you a baseline and intuitive sense of relative worth.
4. Target a Narrow Niche – Identify your best customer and be happy to narrow the target market based on the media and strategies you can use to concentrate your marketing spending against this group with a customized message.
5. Be Consistent – Make sure your message, brand and image is consistent to each target market and that whatever uniqueness (or unique selling proposition = USP) you have is a significant advantage for that group.
6. Benchmark and Measure Everything – Always have a benchmark and run this consistently, especially when you are trying new things. This will continue to generate your base level of business and help to compare the results of other trial expenditures. The overall market can have peaks and valleys. If you don’t have a benchmark for the same period you may throw out a good marketing approach just because it was put out there at the wrong time.
7. Leverage Outside Expertise – Always get outside help if you do not have someone with 10 plus years of marketing experience on your team. Even if you do just occasional reviews of your marketing plan this will generate results that exceed the cost. And by this I mean 10 years managing and designing the marketing campaigns, not writing copy or working as an assistant in the marketing department of some large firm.
8. Joint Venture – Look for joint venturing opportunities that are true win-win deals where you serve the same market and are not competitive but complimentary.
I know half of the money we spend on marketing is a total waste.
– I just don’t know which half.
What Does the Plan Look Like?
For very early-stage companies I am not big on long, formal marketing plans. Once your total marketing budget exceeds $250,000 this becomes more compelling but in most companies you can do this more informally before then. Things are too dynamic in the two or three years of a new product launch. You are better off experimenting frugally and using the learning from this to make rapid changes. You may write a paragraph on each marketing strategy and tactic just to force you to think through the ones you want to do and get input from others but don’t write a 50 page plan, as too much effort will go into adjusting in and it will clearly be obsolete quickly.
In a newer business (less than 3 years out there selling) you will likely be trying new things constantly. In fact if you are doing 10 things then most likely five are small experiments and five are your baseline marketing tactics that you know have worked in the past. All of these can work together better though if you know they all have a significant overlap with the same audience. Then each will add more to the others creating better returns. For example if there is an industry trade group that is a customer rich environment for you then you would do better to attend their tradeshow and buy an add in their newsletter or magazine and direct mail to their membership than do these three things to three different groups. The cumulative impact of all three will make your company more credible, memorable and seem like a market leader and each individual tactic will likely have better results.
I like to use a spreadsheet that shows columns for each of the following:
Media/tactic name and description
Total cost planned
Total impressions and/or repeats (placements)
Cost per thousand impressions
Sale revenue generated from this
Cost per sale, or the percentage of sales this media costs
Return on Investment (ROI)
Obviously the creative can have a huge impact on results but in print advertising the headline is 90% of the result. So change this until you get good results and don’t let creative types suck you into spending all your time and effort changing campaigns and looks. You are better to be consistent with an ugly add than constantly changing your look even if they are all “prettier”.
1. Target narrowly
2. Consistent message and look and feel
3. Repeat 5-10 times against the same audience
4. Track results closely
5. Review and repeat or try something else
Are You Shooting At A Moving Target?
In this day and age the cost and results from various marketing expenditures can change rapidly. It is no longer a given that the lifespan of a marketing tactic will be for many years. You now need to measure and look at the results monthly, or at least after each cycle or flight of marketing. This does NOT mean after each ad placement, but more likely after 5-7 repetitions of an ad. Of course direct mail and some things should produce results in the first wave.
With increasing media prices and reduced effectiveness public relations and advertorial are becoming much more important components of any marketing campaign. These too must be narrowly targeted to a niche of customers where you can offer something better than most.