Issue link: https://read.dmtmag.com/i/469624
MARCH 2015 14 THE JOURNAL Marketing Mathematics: 7 Ways to Measure Your Marketing Effectiveness BY SCOTT STROUD MARKETING CONSULTANT One of the first questions I ask every new mar- keting client is this: What will success look like? By that I mean, what are the target goals, the objectives that will tell us both that the outcome was worth the price? You see, without answering that question, any marketing spend must be con- sidered a cost when, in fact, if properly measured, your marketing should be viewed as an invest- ment. What's the difference? If you knew every dol- lar you spent on marketing would ultimately re- turn you $1.25, then you'd happily invest until you reached your sales or production capacity. The problem is that most companies don't meas- ure the effects of their marketing campaigns, and so continually bemoan every dollar spent as a 'necessary evil'. Perhaps this comes from the old adage that "half of all advertising is a waste; we just don't know which half." Well, that's no longer true. There are ways to measure the effec- tiveness of every penny you spend on marketing, and it doesn't take a degree in accounting to do so. Before I share the numbers that we use to gage marketing profitability - and that our clients use to hold us accountable - it needs to be stated that if you don't engage in some form of marketing your business will wither and die. Period. You must actively cultivate a continual source of new prospects to buy your products. Hoping that new buyers will find you is not a strategy. But, using the following measurements can make your mar- keting profitable and effective: 1. Traffic The amount of traffic you generate is impor- tant. It should not, however, be considered an end result, but rather a starting point. You web- master, for example, will report the amount of traffic that comes to your website; your sales reps will talk about the traffic that came through your most recent open house, etc. Traffic should be defined simply as the number of potential buyers that see you or become aware of your product or community. Traffic is unqualified, in that those individuals might see you in the same way they view an ad in a magazine. They see you, but they haven't done anything to engage with you or in- dicate a specific interest. With regard to your website, watch carefully your traffic numbers, particularly the number of unique visitors and the number of return visitors (the number of 'hits' you get on your website is obscure and fairly useless as a measure of effec- tiveness). Other things you'll want to record and measure include where your traffic is coming from, such as search engines, directories, or other re- ferral websites. For example, if you are a retailer, you'll want to measure the amount of traffic that comes from Google searches as opposed to that re- ferred to you by your manufacturer. Both are im- port, but should be measured separately, or as individual traffic sources, as we'll next explain. 2. Traffic Sources You may have multiple marketing channels that bring traffic your way - your website, media ad- vertising, signage, outside agents, referrals, etc. Keeping track of the amount of traffic coming from each channel requires little more than the disci- pline to keep asking the question, "How did you find us today?" Of course, you'll have those numbers from your online sources, but it's im- portant that you have a clear grasp of how every channel for which you're spending money is per- forming. If you don't measure the results of a campaign, you can't know if it's a good invest- ment; if your money is well spent. And that's what keeps most businesses, particularly in our in- dustry, from marketing adequately and effec- tively. So, keep a ledger of all traffic, and where it is coming from. 3. Leads While traffic is always unqualified, leads are those individuals that take action to identify themselves as seriously interested in doing busi- ness with you. Leads are the people that your sales reps want to talk to, the ones that represent a real potential of buying your home or becoming a resident in your community. As a marketer, the number of leads I can generate for a client is the number that I'm most often measured by. And not just 'leads', but qualified leads. When does a person become a lead? Though every company tends to define that differently, I consider a lead someone that has taken sufficient action to justify a salesperson's personal attention, such as keeping an appointment or at least visit- ing your sales center in person. You should not only record the number of qual- ified leads your marketing program generates, but also the number of leads from each traffic source. You may find that while one channel produces a greater amount of traffic, you get few real leads from that source. Remember, traffic is not the goal, but rather the number of qualified leads. 4. Conversion Rate How many of your leads convert or turn into sales? This may be the most important measure- ment of your marketing's effectiveness, even more that the number of leads. Other marketers might label me a heretic for saying that. After all, the conversion rate has to do with the effective- ness of your sales team in making the sale. That's true, and it is imperative that your sales team be professional and up to the task. I spent too many years as a sales manager and trainer not to ac- knowledge that fact. However, the purpose of all marketing is to generate sales, not just leads. Leads without sales = nothing. While your sales effectiveness is vital, there is a marketing component to your conversion rate. You find that by measuring your sales per traffic source. As already mentioned, you can get a lot of traffic from a single source that may never turn into a sale. As an example, I'm a firm believer that home shows can produce some of your high- est converting leads. However, if at your show booth you decide to have everyone that attends register to win a 55" TV, then you'll get a lot more people to register that will never turn into leads or sales. You're back to generating traffic, much of it worthless, and will generally end up with fewer qualified leads than if you concentrate on attracting those specific attendees that are most likely to be interested in purchasing your home.