When it’s time to set aside money for marketing, most small businesses will set aside a fixed amount, which they feel is “about right”. They will have a few ongoing marketing expenses, like an advert in the local paper or pay per click advertising. The rest will be spent when something comes along that catches the interest and imagination of the business owner. Most businesses do achieve some results from their marketing by using this top-to-bottom approach, but going about it this way will never use the money set aside for marketing in the most effective way. If you want to get as much as possible from your marketing, the whole planning process has to be turned upside down, where you start at the bottom and work your way to the top. It may sound a bit wacky, but it’s actually incredibly simple, and can be done in only simple 6 steps.
Most people think of marketing as something very creative, and in many ways it is. But one of the cornerstones to effectively marketing your business, is something as dull as statistics and knowing your numbers. Instead of starting your planning with the question “how much do I want to spend on marketing?”, ask yourself “how much does it cost me to bring a new customer in to the business?”. By knowing the numbers which form the building blocks of your revenue stream, you can make sure that what you spend on marketing is related to how many sales you want to achieve. Or as planning and time management guru Stephen R Covey would say: “Begin with the end in mind”. Once you truly know your building blocks, you can then set a revenue target, and work backwords through the numbers to see how much marketing you need to do to achieve your target.
Does it sound a bit too good to be true? It’s not – and here’s how you do it.
1. Know where your enquiries and customers come from
This is all about measuring. When someone enquires about your business, ask them casually how they heard about you. Do the same when someone buys from you. If you have a customer feedback questionnaire for your business, include a question on how they heard about you. If you don’t deal with enquiries and customers directly, but rather via a website, you can for example use promotional codes to keep track of how many enquiries or sales have come from a specific promotion. Keep a tally and once a week or fortnight, work out the totals and add to your marketing plan. If you don’t have a marketing plan that includes this kind of information already, you can get one right here on BizWhizz.
2. Know how much you spend on each marketing activity
In your marketing plan, note the costs of each marketing activity. Make sure that you note down costs in a way that allows you to compare like for like. For example, if your plan covers a quarter, but you have paid for an online listing that runs throughout the year, make sure that you are only including a quarter of the annual expense for the listing when it is time to work out how much business the online listing has brought you.
3. Calculate how much each new enquiry and each new customer costs you
By simply dividing the number of enquiries or sales with the amount spent on a given activity, you will now know how much you have paid for a single enquiry or sale. For example, if you have spent £300 on a newspaper advert, and you got a total of 20 enquiries from the promotion, each enquiry has cost you £15. If out of these enquiries you have sold to 5 of them, each sale has cost you £60 in marketing.
4. Decide what to ditch and what to keep
Once you know your numbers, you are in control! Ditch the marketing activities that are expensive and don’t yield enough results. At BizWhizz we often find that Yellow Pages listings are on the expensive and low-yielding list, except for very specific industries. When you evaluate what to keep doing, make sure you distinguish between activities that are meant to produce enquiries and sales, and activities which are there for general awareness. For example, your statistics may show that very few people enquire based on your website. That doesn’t mean you shouldn’t have a website, since many people will use it as a tool to check your business out, before making contact with you. It may mean though, that your website could be improved. Don’t look exclusively at the numbers, but apply all your knowledge about your business and its customers, and then decide how to get the most out of the marketing budget. Also make sure you set aside a small amount for trying new marketing activities, which you have never tried before.
5. Link your marketing spend to your revenue targets
If you haven’t already, set yourself a revenue target for the next quarter, and then pull out the calculator. Work out how much you’ll need to spend on marketing in order to achieve the revenue you want. Will it be exact? Of course not – you are trying to plan the future based on the past. It will, however, give you a pretty good idea about what it will take to achieve the targets you have set.
6. Keep measuring the effectiveness of your marketing
This isn’t a one-off thing. The effectiveness of marketing activities change over time. You may find that their effectiveness changes with the seasons or with the type of message or offer you have in your promotion. Measuring your marketing and being in control is an ongoing activity, and the longer you have been doing it, the better you will be at predicting the outcome of a promotion or campaign.
Once you’ve got the hang of measuring your marketing effectiveness, you can also start measuring individual promotions in order to determine what types of offers and promotions catch people’s attention the most. If you are advertising in the local paper, try different headlines and include a special discount which the customer can claim if they bring the advert in to your shop. Keep a tally of which adverts come back to you, and you’ll start learning which messages grab people’s attention.
