Do You Really Know What You’re Spending on Marketing?

There’s a marketing adage that says it costs nine times as much to acquire a new customer as it does to keep an existing one. Do you know if this is true for your organization? The fact is many marketers only have a general sense of these costs. The Internet has made it easier than ever to measure the true costs of marketing, yet it requires attention and discipline to stay on top of these metrics on an ongoing basis.

However, when you do, you are in a position to make far more informed decisions on where to direct marketing resources and where you should raise the bar on results. You’re better able to gauge ahead of time what new campaigns or ideas might be viable, as well as what to do in-house and what to outsource. Understanding the true costs of your marketing activities enables you to view them not as an expense but as an investment.

What’s the End Goal?

Before you start allocating your marketing resources, make sure you have your key goals and objectives in mind. Consider big picture goals and immediate objectives. Sometimes marketers get so hung up on a great idea that they fail to keep their eye on the ball. Always ask yourself the question: what are we truly trying to achieve with this campaign?

Here are some examples:

Overall Objectives

Acquisition
Retention
Awareness

Specific Goals

Enter a new market segment or product vertical
Generate more (or better) leads for the sales team
Win customers away from competitors
Lower the cost of new customer acquisition
Keep new customers on board long term
Position company executives as subject matter experts
Improve a product’s reputation in the marketplace

What Do I Really Need to Track? (Avoiding Analysis Paralysis)

While most organizations tend to under measure marketing performance rather than over measure, there’s a point where you can get so hung up on detailed metrics that you lose sight of overall returns. For example, lead close rate is an important measurement, but only as far as it relates to your overall cost per sale and profit.

In addition, marketing activities need to be viewed individually as well as how they work together. The key is for results from all of your marketing activities to be greater than the sum of the parts. Marketing cross pollination will always plays a role in customer acquisition: a person reads about your products on your site, then reads customer opinions on a social site, then researches like products on a product comparison site, and then takes an action. Being in close contact with customers and understanding what caused them to take that action can provide valuable anecdotal information into how different components of your marketing programs are working together, and which metrics are the most important.

Here are some examples of key cost metrics:

Cost per sale
Cost per lead
Lead close rate
Average revenue per customer
Average revenue for the top 20% of your customers
Quantity of leads generated per source or per campaign, and ROI for each source
Retention marketing costs per customer, etc.

What Resources Are Required to Make It Effective?

When you think about costs, the resources required for both sales and marketing teams need to be considered. Watch out for hidden costs that aren’t adding to your bottom line.

Here are some examples:

Content creation, blogs, social media, webinars, and multimedia production
Cold calling: sales people dedicating time to research and qualify leads
Online reputation management
Low priced list buys or telemarketing programs that end up taking resources to manage, as well as validate and correct data, or measure performance
Trade shows and events
Focusing resources on immediate low hanging fruit, but failing to keep a healthy sales pipeline on an ongoing basis

Setting benchmarks for costs per acquisition and retention can help you determine when it makes sense to outsource services, such as search, email, lead generation, and content creation. And the best outsourced marketing firms will be transparent in demonstrating performance and making it easy for you to gauge ROI form their programs.

Just as many of us have let our email inboxes dictate a day’s work, we can easily get so focused on day to day deliverables that we don’t take adequate time to assess and measure the underlying costs of our business activities. Taking a step back to consider your true costs of marketing can be the key to generating the ROI you expect.