How do I know if marketing is worth the cost?

Marketing

Marketing for a small business used to involve a brochure, membership of a club or association and a yellow pages ad. Some of these activities still work, but how can you get the best returns for your marketing spend? Read on…

Work out the benefit to your business

To do this you need to calculate the return on investment - ROI on marketing activity. This is something many small businesses just don’t do, it can take time and many of us rely on hope rather than thinking about it. However, marketing should be like anything in your business - a planned exercise. Otherwise it could just be money down the proverbial drain.

Why businesses look at ROI

Return on marketing investment is a metric used by successful businesses to measure the overall effectiveness of a firm’s marketing strategy. It helps the management team make better decisions around future marketing investments.

Marketing activity adds value to different business functions in different ways. A sales team might define marketing value in terms of revenue growth, whereas the operations team might view it in terms of cost management or pricing strategy. As such, you should map out what value means to you and create metrics that measure the impact of marketing for each part of your business. But what if you are a team of one or two?

Marketing for a smaller company: set your budget

In order to track and measure ROI on marketing, you need to know how much you are spending - this is where your marketing budget comes in. Set a marketing budget at the start of the year, alongside clear objectives, which focus on areas such as new client acquisition, client retention, brand and reputation development, etc. Remember for the small business the hidden cost includes the time you spend networking and planning.

Just because the firm invests £100 in marketing doesn’t necessarily mean it will make £1,000 in new sales. There are various uncontrollable factors, which influence the outcomes of marketing activities, and you should take the time to consider how best to spend the money.

This is where your marketing plan comes in. Who is your ideal client?  What and why will they buy from you? How best to get their attention?

How do I set my Key performance indicators?

You can create some KPI’s (key performance indicators) that illustrate the return on marketing investment against each strategic objective and also measure how the marketing investment has delivered value to each business function in your firm. But what do these look like?

What does a KPI look like for a small business?

At the very least, and at low cost, you can keep a simple summary of all the leads you get. For example where did they get your name, was it a recommendation, was it just google or a ‘trust a trader’ website. It’s important to know how they find you as we ourselves stopped certain advertising methods because we could see from our KPI’s it was getting near zero response.

You also need to look at the sources to make sure your message is clear. Are you attracting the right customers?

Having recorded all the enquiries, what was the result? That’s the second most important thing to do. If you get lots of enquiries, but not many orders there will be a reason and one you can normally fix. It could be you are sending out the wrong message in the first place, you are taking too long to reply, or your price is not competitive. By using these simple metrics you can adapt your marketing and sales procedures.

So the metrics could be,

·         Number of enquiries - per week/mont

·         Average response time  - hours/days

·         Percentage turned into orders

These are simple numbers and easy to track. If the enquiries are low, you may need to advertise in other areas or change wording/format. If enquiries are high but conversions low, is it the price? Speed of response or maybe the way you present the offer?  Follow up is also important. Asking why they went elsewhere might be invaluable in providing important feedback

Utilise the cloud

If your business has a client relationship management (CRM) system you can track how many customers your marketing campaign has targeted. You can also track the conversion rate – i.e. what percentage of customers who were marketed to by your firm actually purchased from you each quarter almost at the touch of a button. Cloud CRM can also integrate easily into your accounting system.

Marketing, it’s not just for now…

Marketing is a long-term investment in developing relationships with potential customers. The ROI may take several months to start coming through. As such your reporting should focus on long-term measures (i.e. quarterly rather than monthly measures). As time goes by you should be able to show how business growth followed each marketing campaign. This in turn can help plan your future and make a better return on the money spent.

If it’s good – great. If not? Fix it. We would love to help, why not attend our Accelerator clubs and find out how others deal with their marketing? Our accountability service could make that vital difference. Get in touch here.