Spend Nothing on Marketing Unless: by The Camden Accountants
Spend Nothing on Marketing Unless: By The Camden Accountants
By Ayo Otubanjo
In my first blog, The Key to Business Growth, I explained how good marketing always beats better products or services. So what is good marketing?
Good marketing need not be pretty, or clever, but it must deliver a clear and accountable return in revenue. Don’t view your marketing as a box to tick or a budget to be spent. Consider it a direct investment in new business: it has to produce the highest possible return.
Producing smart brochures to increase awareness or giving out pens with your name on is marketing communications. They are just the tactics, a means to an end: the end is revenue and profit.
Before you spend money on marketing ask yourself what role does it play in getting a prospect to part with their money?
Measuring the Success of your Marketing: ROI
When you measure the Return On Marketing Investment don’t think of it in terms of the revenue generated by the initial sale. It’s the lifetime value of your customers or clients that matters.
The calculation is easy: add up all the costs of a marketing initiative and divide it by the lifetime value of the sales generated.
Here’s an example.
A campaign costs you £3,000 and results in 6 new clients. From researching your client base you know that the average client spends £3,000 with you over their lifetime.
Therefore, the campaign has delivered a return of £18,000. Or 6X the investment.
What’s a good Return On Investment from your Marketing?
When Victor Ho was a consultant at McKinseys he helped Fortune 500 companies optimise their marketing investment. Here’s his view on what constitutes a good return: ‘Rule of thumb for most companies is that 5x is a decent return, and 10x is a home run.’
If you have not been in business long enough to calculate the lifetime value of your average customer make a conservative estimate. And before you agree to any marketing initiative have a clear figure of the return it must generate.
Excellent message Ayo. Far to many businesses focus on the latest marketing fad and don’t even consider ROI.