Analyze Your Marketing Program Costs
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Few companies closely analyze the results of marketing campaigns yet a tremendous amount of money goes into marketing. Learn how to evaluate some of these numbers.
OVERVIEW [top]The most important assets your company has are its customers. After all, without them you have no business. Therefore, the money you spend on marketing — to attract new customers, and to generate repeat business from your current customers — is money well spent. But few companies closely analyze the results of marketing campaigns. For example, how do you know whether a particular TV ad produced any new business, or enough business to justify its cost? If your marketing program is not managed carefully, your company is at a double disadvantage. The cost of the program comes out of your bottom line. In addition, you suffer the opportunity cost of not getting the business you would have obtained from a well-designed, effective marketing campaign. In this Quick-Read you will:- Examine the various costs that are part of a marketing campaign.
- Learn how to track the response your campaign produces.
- Evaluate the cost and profitability of each response.
- The cost of producing the campaign.
- How many expressions of interest it generates, from no response on up to possibly thousands of leads.
- How many actual sales are generated.
- Study your current and prospective customers, and figure out the most effective ways of delivering your marketing messages to them.
- Set quantitative objectives for your marketing campaign by market segment: "Increase sales to existing mature customers by 15%, and increase inquiries from potential new young customers by 50%."
- Calculate the value of various categories of customers to your company. This will give you an idea of what you can justify spending to attract each additional customer.
- Tabulate detailed cost estimates for each marketing strategy you are considering.
- Segregate fixed and variable costs; this will help you evaluate the cost of repeating the campaign, which often involves only variable expenses.
- Key each campaign with an offer code, a telephone extension or other element.
- Track responses, capturing the code or other identifier that tells you the source of each lead. Ask prospects how they learned of your company. Record this information daily or weekly.
- Calculate the cost per response for each marketing campaign. Remember to update these over time; some campaigns have long "tails;" an ad or mailer may continue to generate calls for weeks or even months.
- Track the conversion of leads into actual purchases. Evaluate the effectiveness of each marketing activity in terms of the profits that result.
- If you have a retail operation with a variety of products, get a frequent-shopper card program in place. Analyzing the FS database will enable you to tune your marketing program to a degree never before possible.
- Look for differences among the customers you attract, to isolate those who become repeat buyers and buy in volume. Are they in a market segment you can target in future campaigns? Finding more customers like them is worth all the effort you will invest.
- Remember that your results must be considered in relation to the overall market. If your sales are steady while competitors' sales are off 25%, you've gained significant market share. If your sales are up 25%, good for you, but don't celebrate until you've confirmed that competitors' sales aren't up even more. When you notice pertinent market statistics in trade journals and in the business section of the newspaper, copy them down so you'll have them for analysis and planning.
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