For over twenty years now I’ve watched thousands of businesses waste massive amounts of hard–earned cash on marketing that’s just like shooting bullets in the dark. This ‘traditional’ approach, which has become known as ‘spray and pray’, is actually the way that the vast majority of businesses spend their time trying desperately to get their message to market. It’s expensive, as it creates a high degree of waste, something every business should aim to reduce. It’s also time consuming and even worse than both of these facts, it’s completely unscientific, which means that even if it does work occasionally the chances are you’ll never know why and therefore be unlikely to repeat it.
I’ve heard experienced business owners tell me “Nial, it’s a numbers game” and the sad reality is that for most that’s all it will ever be. If you’re willing to keep firing those bullets you might just hit something but the chances are that you’ll just keep on wasting your resources and continue to spend money looking for a marketing mix that actually works – consistently – for you.
The fact is that the secret to good marketing lies in the numbers; the numbers tell you what to do and how you’re getting on. They don’t lie and they have no emotional agenda designed to pull you off course.
If you’re serious about sorting out your marketing and giving yourself a plan to work towards progressively, the first thing you need to know are your numbers. Here’s a short exercise that I encourage every business to follow:
Know your Profit Margins; it’s shocking but true that a majority of business owners and managers don’t actually know what their profit margins are. You may have a range of products and your costs may flex with the needs of supply and your delivery mechanism but know your margins. Every business should be able to extract a figure, on any given day, of how much profit each product and service will deliver.
Know your Average Lifetime Customer Value; every customer relationship you create has a value. You might have repeat customers who buy a little from you every week, or alternatively you may only sell once to the same person. No matter what you do or sell, you should be able to calculate what a customer is actually worth to you over the lifetime of that vendor-consumer relationship.
Know your Cost of Acquisition; this is how much you’re actually willing to spend on attracting/buying each customer. You can only work this out if you know the two figures above. Some businesses I take through this exercise are shocked to find that they are buying customers (through their sales and marketing activity) at a loss. Remember to calculate all fixed and variable costs and don’t just look at Cost Per Lead; you still need to know what your conversion rate is.
Just looking at these three simple metrics will give you a solid base on which to build your marketing plan. When you know your figures you’ll be able to make some informed decisions and feel much more confident about trusting your marketing, knowing that you’ll create a positive profit margin from every new relationship you win.
And lastly, don’t trust people who give you figures that end in a ‘0’ or a ‘5’, they’re just guessing! Do the work and the numbers will help you make your marketing work.