Being a marketer today is hard. The landscape of marketing solutions is saturated, with more mediums than ever before, and more pressure on you to perform.
So, how does the modern marketer know where to put their marketing budget to get the best return? The answer lies in understanding these 4 key elements.
1. Knowing Your Cost Of Client Acquisition (COCA)
To adequately determine the viability of any marketing solutions lies in knowing how much it costs to acquire a customer. Some companies measure this differently, depending on what variables you want to include. However, for the purpose of this example, let's take COCA as being the total sales and marketing cost, including salaries, commissions and marketing spend for your chosen period (month, quarter or year) and divide that by the number of clients acquired in the same period.
$1m in sales and marketing / 100 customers = $10,000 COCA
There are a number of ways your company may wish to isolate certain elements of these COCA figures, such as the sales vs marketing component, or removing salary costs etc - but the key is to have a tool of measurement that you can review and assess to determine on-going success and program viability.
With an understanding of your COCA you should work towards developing integrated marketing programs which give you a true marketing ROI for a total campaign. Then if it works, rinse and repeat.
2. Measuring The Value Of Your Sales Qualified Leads (SQL's)
If you invest in programs which focus on developing Sales Qualified Leads and you know your lead to customer conversion ratio, then you can really hone in on what is working at what's not.
For example, with a lead to customer conversion rate of 30%, then the value of an SQL is $3,000 (30% of COCA).
Therefore if you develop a marketing campaign and the cost of each SQL is under $3k, then it has been a success.
$150,000 campaign which develops 60 SQL's, gives you an SQL cost of $2,500 = Success
3. Knowing Your Customer Lifetime Value (CLV)
In a moment I'll explain who you want to attract and we've just covered how much it costs to attract them, so for now, let's establish what they are worth to you over their average lifetime.
Depending on the nature of your industry and product/service offering you may need to calculate and analyse this differently, but for the purpose of the exercise, let's use a simple formula based on:
(Total average annual profit per customer / churn rate) - COCA
(Churn rate is the inverse % of your average customer retention - i.e. average retention of 80% gives a churn of 20%)
$30k avg annual customer revenue, @ 40% GP, 20% churn & $10k COCA, gives a CLV of $50k
Now, no doubt you have heard of the 80/20 rule, whereby 80% of your revenue comes from 20% of your customers (if you haven't already, do it - you will be surprised how accurate it tends to be). Well, this is what the objective is: focus on attracting more of these top customers and watch your CLV skyrocket.
Before we moved away from the formula based components, there are considerations you need to be mindful of. For example, long term investments in marketing programs that aren't expected to pay-off this year will skew your COCA. Large, one-off purchases by an enterprise customer will skew your CLV. There will be numerous examples of such variables and the key is to be as specific as possible with your analysis and calculations. Look at isolating certain campaigns, profit centres, or any other elements which allows you to find a framework that suits your business.
With the right framework of marketing solutions and marketing partners you can improve your CLV and reduce your COCA, which leads me to the purpose of this post. There is no defined prescription that will accurately tell you where to spend your marketing $ without knowledge of key insights like these.
4. Your Customers Are Actual People, Know How To Engage Them
If you have been a subscriber of my blog for a while now, you would be quite familiar with my continued focus on advising marketers to develop their buyer personas. If you don't know your preferred buyer persona, you have no true guide for knowing where they go for information and what will help solve their problems. Have a read of this blog post for more details.
Let's assume you build out your buyer personas and find there is a particular trend for, among other attributes, Financial Controllers that skews male. You name this buyer persona Financial Fred.
You establish that Fred:
- Is the head of Finance for medium sized company and worked his way up from junior roles.
- Is married with young children, is aged between 40 - 55 and has a dual HH income of $180k.
- Has a calm demeanor, yet is hard to reach as a receptionist screens his calls.
- Has goals primarily focussed on developing systems that help make his team more effective.
- Finds it difficult to get things done with a small team.
- Uses LinkedIn regularly to build his professional network and keep across industry happenings.
You now have a pretty strong guide as to what content will engage with Fred and also where best to find him (and also where not to try and find him).
No matter where you look you won't find a paint by numbers approach to marketing success, but understanding the key numbers and your buyer personas will allow you to have a newfound sense of clarity on what is likely to succeed and what will waste your time and money.
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