For most of us, a lot of marketing is speculative and difficult to measure. What’s the value of paying a marketing consultant $1,000 for a logo versus $10,000 for a brand strategy? Is it going to return more than a tenfold return in sales?
For any business, measuring the value of marketing is difficult but it’s rarely impossible. In fact, it possibly the most important part of effective marketing because it allows you to determine what you should do in the future and what you should change.
Why a marketing consultant measures marketing
As a marketing consultant, demonstrating value in the work we do is critical. At The Lead Agency, no matter what our clients ask us, we focus on providing two outcomes: more leads and better quality leads.
However, for most businesses, leads and sales revenue might be important, but they don’t necessarily show enough detail about the marketing activities that are generating leads and sales. Quite often, what appears to be the best lead generation marketing channel is heavily
With that in mind, here are the 5 key marketing measures your business should use:
1. Average total income per customer
What’s your total annual revenue? Now divide that by number of customers you have. This gives you a baseline to evaluate your customers for all sorts of metrics such as:
- Who are your best customers and where can you find more of them?
- Which customers should be spending more with you?
- Or which customers do you spend too much time servicing?
Knowing the average total income per customer you can focus on b2b marketing that gets the best possible value for your effort.
2. New Customer Acquisition Cost
Measured by: your total new customers, divided by your total marketing and sales spend. If you know this average cost you can start to analyse what marketing activities can be reduced or changed to bring the average down. At the same time, it also helps you to plan and “buy new business” assuming you keep your marketing activities the same.
3. Leads conversion ratio
Possibly the most important metric of all for marketing consultants. All businesses want to know how to get more leads, but the real gold is actually increasing lead conversions. If you get 100 leads a month at $50 each and convert 20 of them, your lead conversion ratio is 0.2 (20 conversions divided by 100 leads). If next month you change your marketing to get 50 leads at $100 each and convert 25 of them your lead conversion ratio is 0.5. Less leads, but better quality leads that have a higher conversion rate.
4. Referred customer ratio
Our marketing consultants use this to determine quickly how healthy your business is. While there’s plenty of ways to get more referrals, if a business is providing a good service, then they are still likely to be referred. Referrals are gold for any business. They’re more likely to purchase, they already have a positive opinion of your product or service and trust you. Another metric associated with this is to consider is the percentage of your customers who are likely to refer.
5. Repeat business percent
This is another measure of customer satisfaction, but also another great measure for opportunities. If you are getting referrals, but only a few customers are using your product or services again you have a significant opportunity to grow your business to satisfied customers by extending your offering. Is there an additional service or premium service you can offer to your past customers? A happy customer has already gone through the process of deciding to use your service and has built up real trust through their experience with you.