Helping small business owners develop extraordinary businesses that really work for their customers, their employees, themselves and their families

The ugly side of marketing

When most people think of marketing, they think of the “sexy” and “creative” side of marketing, like making promotions and web sites.

There is another side of marketing that isn’t glamorous, but without which the other stuff means nothing.

Measuring results.

You may create a popular, award-winning, and entertaining advertisement. If it doesn’t attract customers and ultimately create sales, it’s worthless!

To evaluate the effectiveness of a promotion and of a company, statistics must be gathered and evaluated.

For example, what is the lifetime value of a customer? What is the gross profit a customer will generate over the time they continue to be a customer? This statistic drives almost everything that you do. It tells you the upper limit of what you can spend to get a customer.

What is the cost per lead? The business that can and does spend the most to get customers with a high lifetime value that justifies the investment generally wins.

What is the cost per sale? Are you attracting the right kinds of leads who will ultimately buy your product or service?

By tracking the lifetime value of customers by the source of the customers, you might discover that a particular source (campaign, web site, social media) generates higher quality leads that justifies a higher investment in that type of promotion. (Mail more. Place more ads.)

What is the contribution to profit for a particular customer and the average contribution to profit for certain groups of customers? A customer who is a “whale” that make a big contribution to the profitability of the business (or a big donor to a charity) should receive special nurturing attention and priority of service. Consider making a special “Elite service” category for “whales”.

What is the average transaction value? If the transaction value is small, it could take a long time to recover the investment to get the customer. A business can afford to spend a lot more to sell a luxury automobile that to sell a candy bar. If your products have small gross margins, you can increase the transaction value by packaging them together or selling them in quantity (like a 10-pack of writing pads.)

What is the Present Bank? These are gross profits from today’s sales.

What is the Future Bank? These are assets/information that represent future income for the business. For example, a business should keep a database of information about its customers, including names, purchase history, addresses, telephone numbers, and email addresses that can be used for marketing campaigns. A restaurant should be collecting birthdays and anniversaries of its guests to generate future income with offers during those months. For airlines, customers that sign up for frequent flyer miles point represent future bank. The collection of this information should be measured daily, just like sales. Arguably, it’s even more important than today’s sales.

This list is not complete, but represents a good start for statistics to gather. These are listed as critical business management information by Dan Kennedy in his book, No BS Ruthless Management of People & Profits.

Notice only gross profits from current sales are typical financial accounting statistics.

When you implement marketing strategies and techniques, remember to measure the results of your efforts.

If you would like to discuss how gathering this information will help you manage your business more effectively, send me an email at mgray@profitadvisors.com for a complementary initial consultation.

Free Email Updates
Get the latest content first.
We respect your privacy.
Helping small business owners develop extraordinary businesses that really work for their customers, their employees, themselves and their families