Marketing is a difficult subject for most business owners. We all know it’s important, but it is often hard to quantify the return on marketing spend which means business owners often cannot see the value in their marketing. As a result, many businesses simply take no action.
Also, the return on marketing spend is often unclear, which leaves it very difficult for business owners to understand the value of their marketing. The inevitable result is that business owners put marketing in the too hard basket and miss out on the potentially huge benefits that effective marketing can deliver.
For example, say a small business devotes $1,000 to advertising on a local billboard. How could they know how much new turnover that advertisement created? There are ways to measure this, but before the advertisement is displayed it is important to have processes and planning in place to really understand the return on the marketing investment.
Core to understanding the value in marketing is the ability to accurately measure both what is spent and the value of the resulting new business. Accurate measurement requires two things:
Good bookkeeping habits ensure that all of your expenses are correctly assigned and tracked. This means regularly keeping on top of your data entry and ensuring you use sensible expense account names, such as “marketing & advertising”.
In order to track the results of your marketing efforts, it is important to plan your marketing efforts before you pull the trigger. For example, before placing an ad in the paper, it is worthwhile including a promotional code or separate phone number so that the number of new enquiries can be determined. In the online world, using a google adwords campaign is a great way to track new enquiries because adwords tracks all of the click through enquiries for you. That said, it can be helpful to include a specific landing page (a page separate from your main webpage) for your promotion that includes a specific web form to accept new enquiries. Again, this allows the number of new enquiries to be accurately determined.
It is also important to determine the estimated value of each new enquiry. For example, lets say you win a new customer and you have been able to determine that it cost you around $500 to secure the new account. However, without knowing roughly what the new account is worth, its impossible to determine what your return on the $500 investment really is. If that $500 investment only resulted in a $200 one off sale, its clear that this was a poor outcome. However, if that $500 investment secured three new customers that each generate $10,000 in new business per year for a 10 year period, it is obvious that the marketing approach was a resounding success and it should be repeated again in future.
RDC Partners can help with improving your bookkeeping practices and can act as a sounding board for your marketing decisions. We’ll give our honest feedback that is backed by 30 years of business advising experience. To find out more and get the ball rolling, fill in the form below to sign up for your free initial consultation.