Regardless of the industry in which you do business, marketing should be a major component of your business plan. This applies to business-to-business companies as well as those that are selling directly to consumers. Marketing is the engine that drives customers to your doors, and the fuel on which it runs is composed of varying ratios of time and money. In order to ensure this engine is optimized to its best efficiency, it is important to regularly measure the effectiveness of your marketing plan and the campaigns you have designed to achieve your goals.
Many companies treat their marketing budget as an expense rather than an investment. They spend the allocated money without knowing very much about what their marketing efforts are returning to them. It is hard to imagine a company keeping a sales rep who habitually doesn't make any sales, but if you are not measuring your marketing plan, you could be getting a zero return on the money being spent and would not even know it.
There are several different ways of measuring the effectiveness of your marketing, but the metrics you use should be tied to your business goals. Once you know how your current marketing campaigns are performing, you can begin to tweak them as needed or do a complete overhaul and then determine which methods are giving you the best value for your money.
There are several different ways of measuring marketing performance, so select the ones that are best for your current business goals. For example, if you have determined that you need to increase your email newsletter subscribers, then measuring immediate return on investment may not make the most sense.
Return on investment is one of the best ways to measure a marketing plan, and many businesses use this as the sole criterion. For example, if you spent $1,000 on a marketing campaign, and it generated $2,000 in profit from sales, then the ROI was $1,000, or 100%.
When you count each sale as a win, cost per win simply means the cost of each sale. Suppose you made two sales with a marketing plan that cost $1,000. The cost per win was $500. This is a good metric to use when comparing two or more marketing plans.
Cost per lead is similar to the cost per win measurement except it measures leads (potential customers, or prospects) instead of sales. If you received five leads from a marketing campaign that cost $1,000, then the cost per lead was $200.
This is also a good way to compare the cost of different marketing plans when, for example, you are trying to increase email newsletter subscribers. However, it doesn't address the revenue since leads can be of different quality, and there is no way to determine how good or bad those leads may be.
Conversion rate measures the number of visitors to a website who turn into customers or leads. It's similar to cost per lead and cost per win, but you're comparing the number of visitors from a marketing campaign instead of the cost.
For example, if a marketing plan brings in 1,000 website visitors, and five people buy something, then your conversion rate is 0.5%. When conversion rate is used with bounce rate (the number of visitors who leave your website as soon as they land there), it can give you great insights on the quality of traffic a campaign is giving you.
Another way of comparing a marketing plan to sales is to look at the increase in sales during the time of a campaign. For example, if your sales were $100,000 the month before the campaign and increased to $110,000 the following month, then the incremental sales resulting from the campaign would be 10%.
If you use Google Analytics or a similar tool to track website performance, you can use the same tool to measure the performance of each marketing campaign and then compare each campaign to the others as well as to organic traffic coming to your website. You can measure the amount of visits per dollar spent or the number of sales conversions or leads.
Customer lifetime value can often give you a more realistic representation of a marketing campaign's cost. This is particularly the case if your customers tend to buy more than one item over the years. This can be done over the course of a few years for long-running campaigns by tracking customer sales directly resulting from the campaign.
Alternatively, you can average the number of sales or the amount of revenue you generate from each customer on average and compare this to the cost of today's campaign.
For companies with long sales cycles or those competing on a national or global market, brand awareness can be extremely useful. The effectiveness of this metric can require a great deal of time, so it can be difficult to see the correlation between brand awareness and sales. If you determine that you have good brand awareness but sales are in a slump, it may be best to use this metric with another that is more immediate, like ROI, cost per lead or conversion rates.
Beyond brand awareness, many companies are beginning to understand how engagement can be used to measure the effectiveness of marketing. It's not just a question of whether or not customers recognize your brand but how often they talk about it with others and, in the case of social media, how often they respond positively to stories about your brand or your company.
There is a direct correlation between engagement and sales, as the more customers engage with a brand or a company, the more likely they are to make a purchase.
With advances in technology over the past 20 years, one might assume that measuring the effectiveness of a marketing plan should now be a science. However, in 2016, a New York American Marketing Association BrandSpark survey of American marketers showed that:
- 57% reported that measuring ROI was the biggest challenge
- 33% said their biggest challenge was coordinating cross-media campaigns
When it comes to digital marketing, 70% stated that it was a strong focus, while 24% said they were planning on making it their focus. However, 29% stated that they lacked the analytics to properly measure digital marketing performance. While 83% agree that marketing has become more complex, they also agree that it is more important than ever.
Taking chances with new ways of marketing and adopting new technologies are important to the vast majority of marketing professionals in this survey, with 78% and 83% agreement respectively.
Online marketing can be by far the easiest and most precise way of measuring the effectiveness of a marketing plan. At the heart of this are website analytic tools like Google Analytics. This is very effective when marketing efforts bring people to your website.
Using different landing pages for different campaigns, you can immediately see how many people came to that page, how many left and how many went on to subscribe, sign up or buy something. For example, you can use one landing page for email campaigns, another for Facebook and another for Twitter.
By looking at the traffic, you can determine which are most successful so that you can tweak those that are not performing as well or put more emphasis on those that are. There are also many third-party tools to use in conjunction with Google Analytics to give you even more precise data.
Advanced client relationship software is so useful for tracking leads, customers, conversions and sales that in itself, CRM is often mistaken for a marketing tool. Combined with website analytics, CRM software can help you track prospects and customers on your website. You can also track:
- Email bounce and delivery rates
- Success of telephone marketing campaigns
- New leads generated
- Ratio of leads to qualified leads generated
- Customer lifetime value in sales
Additionally, CRM software can often generate reports so you can see how effective your marketing is in terms of its ROI. Simply by plugging in the costs of your campaigns, you can see, for example, what the cost per sale or cost per lead is using real-time data. Software companies are also integrating artificial intelligence into CRM software to help you predict how effective campaigns can be while you are still planning them.
Recently, companies like SAS have been taking many of the features you would find in web analytics and CRM software to a new level with multichannel marketing analytics software. With such software, you can analyze past marketing efforts to see where the strengths and weaknesses have been as well as current marketing campaigns in areas like:
- Number of leads generated
- Quality of customer engagement
- Customers' preferred channels of interaction
- Brand mentions on social media
It also gives you the ability to compare a direct mail campaign to an email campaign or the performance of one blog post compared to another or compared to a social media campaign. The software can also predict results from changes in your marketing, like what increase in sales you would see if you hired another sales rep or to determine which cities would be most receptive to a new campaign.
Surveys are one of the oldest tools for measuring the effectiveness of marketing, but that doesn't mean they are antiquated by any means. Well-designed email and online surveys not only tell you how well your marketing is succeeding, but they can in themselves be used for creating brand awareness and determining your target market. Surveys are not limited to digital media. Surveys in retail stores and even on street corners are still popular with many businesses.
Survey questions include:
- Demographic information like age, gender, income and education
- Which brands have you heard of?
- Where have you seen brand advertising?
- Where did you hear about a brand or product?
- When was the last time you bought a product?
- How often do you buy a product?
- What is your budget when buying specific products?
Before doing a survey, be certain to review your marketing goals and review a few articles on basic statistics and statistical analysis so you can determine the right sample size for your market.