Business 101: Take time to examine effectiveness of your marketing efforts
By ANDREW VAN HORN
Business Columnist
Editor’s Note: Willisburg-based business coach and consultant Andrew Van Horn will be writing columns for the Nelson County Gazette offering tips and strategies for business owners and entrepreneurs. Send your business questions to him by e-mailandrewvanhorn@actioncoach.com or call (859) 940-5517.
Sunday, Nov. 27, 20111 – Marketing, where we should spend 50% or more of our time as a business owner but rarely seem to do. Most people see marketing as an expense since that is where it falls in accounting. Following that line of thinking we should limit this expense to increase our profits. This thought process is wrong.
Marketing buys customers. When we market, we spend money to bring in potential customers, or leads. Our sales team then converts the lead to a paying customer. Ideally the customer spends more than what we spent to bring them in. In order to know if our advertising is making money we have to know how much we are spending on each customer.
A small town baker wanted to further his business and hired an ActionCOACH. The coach quickly got the baker to realize he bought each customer for $6.51. Unfortunately, what he bought for $6.51 returned only $3.42. He was losing money. Working with his coach he implemented some new strategies and started to measure the results. The changes enabled him to buy that same customer for $1.51 and get a return of $5.45.
If each customer cost you $1.51 and you got a return of $5.45 how much money would you spend on marketing? What are you currently paying for customers? What return are receiving for that purchase?
In marketing, we must test and measure. Testing and measuring enables you to make the right choices and know your cost per customer. Customers are a commodity bought with the marketing budget. If your marketing was effective and you doubled your budget would you also double your customer base? Knowing the marketing numbers allows your company to have an unlimited marketing budget. By buying your customers at the right price the only limit in your business is the inherent ability to handle the extra business.
Take the next month to test and measure your marketing. Imagine the heights your company is going to achieve when you know how much a customer costs and how much they spend per transaction.
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