On The Mats – Four Ways to Implement Your Business Plan
How do you know if your marketing is working for you? It is simple. It is all about asking for information, understanding what it means and taking immediate action.
The reason many of us, especially small business owners, are not happy with the marketing efforts that we are using to sell our services or products is simple: we don’t really know what is going on. You may have an ‘average’ idea but you have to do better than that. You need to understand that your gut can be wrong and figures rarely lie. Before we get any further, let us tell you what marketing means. Marketing and sales are two different things. Marketing is the tool you use to get somebody to notice you, to get that somebody to your door. Once you get somebody into your store and the person is looking around, half the battle is won. Now, you have to let that sales system convert the window shopper into a buyer. Once people see what you are about, you can actually make that sale. That is why marketing is so important. It tells the world that a) you exist and b) you provide what they are looking for.
In order to make your marketing lean, mean and on target you need to understand what is actually working for you. This is where something we call the ‘Cost of Acquisition’ comes in. It is a simple concept really. It means how much are you spending on a marketing tool per customer. If you spend say $1000 on a newspaper advertisement and get 10 customers, the cost of acquisition is $100. If the product you are selling, say solar water heaters, cost $400, your marketing is paying off.
So, how do you figure this out? It is a simple answer again: just ask. Ask your customer where she or he heard about you and you will have a clear idea. Every form that you ask them to fill, physical or virtual ask them that very important question. And people are more than happy to tell you about it. What you do next is, get a spreadsheet made (you can download it here) to track your marketing efforts and find out your cost of acquisition, list them down. Any marketing activity that is not doing the desired job (you are paying $100 and getting $50 back), you knock it off your strategy right away. Don’t bleed unnecessarily. Get rid of the white elephant. It is hard to maintain what you cannot afford.
Lifetime value
In order to fathom how deep the marketing rabbit hole goes, you have to know the lifetime value of a customer and put it against the cost of acquisition to make a real dent as far as marketing value is concerned. This again is a simple calculation:
1. Find out how long customers stay with you
2. How much does each customer spend during the time s/he spends with you
So, if one customer stays with you for 5 years and spends $10,000 during that time, while another stays with you for 2 years and spends $4000, the lifetime value of this activity is 3.5 years and $7,000. If you put acquisition cost against the lifetime value, you’ll know exactly which marketing campaign is going for you.
Which means, if you acquired a customer for $100 from that newspaper ad you are going to make $7,000 over 3.5 years. That is really good marketing.
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