Marketing Math-does it ever add up?

ROI- Return on Investment. Since I started working in advertising and sales , this is a common question. 20 years ago the tried and true way to know your advertising was working was because customers brought in your coupon from the newspaper. Fast forward to today and a long list of advertising channels, how do you figure your ROI and what to spend?

There are many formulas out there that will take into account all your expenses and help you get to the penny. A solid rule of thumb is 5–10% of your gross, if your business is under 5 million a year in gross sales. This will vary by years in the business, strength of your category and your own level of comfort.

Where are you spending your marketing dollars right now? Make a list of everything from google ad words to hiring a media consultant.

Question: Do you know where your leads are coming from? Do you know where your sales are coming from? And are they coming from the same place?

Marketing works in many ways:

Branding will get you on the consumers “mental list” of choices. I need to buy a new bed, I am familiar with these 5 stores because I have seen them on television, heard them on radio and saw them online. This type of advertising builds a relationship through the selected medium.

Call to action or price and item medium, attempts to urge a customer off the “i’m thinking about buying a new bed” into ” that’s a good deal, I want that bed”. Newspaper still does this very well with auto dealers, liquor stores or any business that needs to showcase more than one item and price point at a time.

Geography and search advertising has grown into an affordable and highly targeted advertising tool. Google ad words have saved businesses money. When it works, the ROI is amazing. The trouble with it is, it waits for you to want it, “the bed”. If you already had a list of stores you are familiar with from brand advertising, and you are googling the closest store to buy the bed, it is unlikely you will switch your course of action because of a google ad. However, the geo-target-ability is phenomenal. If I am looking to get my nails done it does me no good to see a place in NYC when I am in Boston. I don’t care how good it is, I need that service here and close by. For the most part Google knows where I am and serves me businesses close to where I am at the time of searching.

Ok, back to your math. Once you have listed how much you are spending with each advertising source, tool or adviser, match that up with where your sales are coming from. You know where your customers are coming from, right?

Car dealers do this in a simple way, they check the car radios of customers, people who come in for service or for a test drive. They use that information to help them make marketing decisions.

You can simply ask customers where they heard about your business. It’s not always accurate since people are busy and bombarded with so many media messages. But it’s a start. Starting a dialogue with good customers will give you lots of valuable information, you can use to attract more of those good customers. If you are only using one advertising channel ,this is a great test or validation that you are advertising in the right place. The ROI results will be pure.

Now take a hard look at the spend vs results. Does it add up?

Many large advertisers have switched main stream media dollars into digital advertising. There definitely seems to be a trend in that direction, but be careful. Mc Donald’s and Coke have millions of marketing dollars to play with, you may not. If you do, that’s fantastic, and please call me. What I am suggesting is a more modest approach, that will vary by business and individual strategy.

From the information you just learned, identify your most successful brand advertising channel and continue with that. This will continue to put you on the mental list of target consumers. Then add in your geo and search, so when they are ready to buy and they search, they find you. There are many digital options and this landscape continues to change daily. We will talk more about re-targeting and Facebook advertising and more as we go on.

My hope for today is to give you something to think about and a basic plan to start sharpening your adverting ROI. Feel free to send me questions, I am happy to answers as many questions as I can for you.

Does marketing math look like this?

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Originally published at alisonsawhill.com on March 24, 2016.

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