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Do you Understand the real numbers that determine if Your Marketing is Paying Off? How do you know if it's worth doing more Marketing? Find out the Real Math Behind Marketing
Measuring the Effectiveness of Your Marketing Strategy
How do you measure the real effectiveness of your Marketing Plan or Strategy? If you are caught up on the wrong percentages, you could really be fooling yourself. In fact, if you’re caught up on percentages at all instead of the real dollars and returns on your investment (ROI), you really are fooling yourself.
I am not sure why, but most business owners look at the response they get from their marketing efforts and gauge how effective their marketing is on that number alone. In fact, that’s totally backwards because the success of your marketing strategy shouldn’t be based on the rate of response.
A Marketing Example
Let’s assume you initiate a marketing program where you take your client list and mail them an offer to return to your business. You may be surprised to find that if you only got a 1-2% response from a mailing like that, your marketing plan may be considered successful.
Do the Real Marketing Math
Consider a business marketing plan to send out letters or postcards to 400 clients who have not made a purchase in over a year. You may consider that your ‘dead list’ of customers. If you only got a 2.5% response from that mailing, would you consider it a marketing success?
What do Marketing Professionals Consider as
a Good Response?
Most direct marketing people would consider a 2.5% response rate from a mailing to be very good. But let’s not stop there. When you want to really measure the effectiveness of your overall marketing strategy, you must consider the lifetime value of a customer.
In this scenario, the 2.5% response from the 400 piece mailing means that the business owner actually got 10 new customers. Actually, he revived 10 old customers, but because they haven’t made a purchase in over a year, we’re going to consider them new customers.
The Figures Don't Lie
Now the actual results will vary according to your business and the products and services that your sell, but for this example, let’s consider that the average purchase for a customer would be about $80.00 every 3 months. That would total $320 per year ($80 x 4= $320).
When it comes to Your Marketing Strategy, You Must
Consider the Customer's Lifetime Value
The value of each of the 10 customers that have been revived from the list of old customers is actually $3,200! If you continue to do the math and work out the lifetime value of those 10 customers, the true value is several thousand dollars.
When you are considering a Marketing Strategy and your offer, you must look at what the overall lifetime value of your customer is. That way, you will be able to better determine if your marketing strategy is effective and worth while.
In the example provided above, if the 400 piece mailing had a total cost of $800, would you consider the marketing solution to be profitable? Would you consider doing another mailing? I would! In fact you can’t deny the fact that the marketing strategy worked. The original investment of $800 returned immediate new sales of over $3,000. How could you not consider that a success?
Measuring Up Your Marketing Strategy
When you consider the lifetime value of those 10 new customers (that you would achieve by continuing to contact them with your follow up marketing solutions) the return on the investment is huge! The bare facts are that the investment of $800 returned $3000 immediately and several thousand dollars more over the following years. That’s good a effective marketing strategy!
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