One of the biggest keys to business success is a strong marketing plan. But it’s not enough to simply implement your marketing strategy; if you want to repeat your successes and avoid wasting money and effort, you’ll need to track your marketing efforts closely.
Every marketing endeavor needs to be analyzed to find out what works and what doesn’t. One way of doing this is to track your return on investment (ROI). You can track your ROI for sales and for profits. The return on investment is a mathematical equation. There are several ways to calculate your ROI, but I like these simple formulas:
SALES ROI = Your sales divided by marketing investment
PROFIT ROI = Your profit divided by marketing investment
The minimum return on investment should be 2 to 1. That way, you’ve at least covered the upfront costs of your marketing. Both of these calculations are important. The sales ROI lets you know if a particular marketing tactic is worth repeating, and the profit ROI is allows you to see if you covered your costs.
Here’s an example. Let’s say you’ve taken out an online ad and signed a three-month contract. The ad costs you $25 per month, making a total marketing investment of $75. During the three-month period, your ad generates six sales, which earns you $240 in sales, $190 of which is profit. You breakdown your ROI and find that:
Your sales ROI: $240 divided by $75 investment = 3.2 ROI
Your profit ROI: $190 profit divided by $75 investment = 2.5 ROI
So, should you advertise on this particular website again?
The answer is yes. Your marketing efforts in this particular ad campaign have exceeded the minimum 2 to 1 formula. The bottom line? You made money here. There is no guarantee that you’ll make the same ROI next time—you could do better, and you could do worse. Only time (and tracking) will tell you if the trend will continue. But if you stop now, you’ll simply never know.
That’s why in marketing you can’t just switch tactics willy nilly. You’ll need to be consistent with your efforts over time to determine if a particular marketing approach is right for your business. Running an ad just once doesn’t give you much insight into how the particular ad will work over time. (Unless it completely falls on its face … and even then it could be a one-time fluke.) Ads and marketing plans almost always need some tweaking. Just a few minor changes can mean a huge difference in your ROI.
So what do you do if you haven’t been tracking your advertising and marketing expenses? Here are some tips to get you started tracking your marketing right away.
Tracking Tip #1: Keep it simple.
You can buy specialty software programs to help you track your ROI and keep tabs on your marketing plan. While these software programs can be helpful, they can also be expensive. Don’t let the cost overwhelm you or keep you from tracking your efforts. The truth is, you don’t have to have a fancy software program to track your results. You can create a simple chart in Excel (or other spreadsheet program) that will help you track and calculate your ROI over time. And even a pencil and paper is better than nothing.
Tracking Tip #2: Know your expenses.
Most business owners are keenly aware of what they spend in advertising efforts – print ad costs, online ad fees, agency fees, and so on. However, they often forget to include the costs of things such as office supplies, equipment, samples, and even labor. Keep track of everything you spend that relates to marketing in any way.
Tracking Tip #3: Ask “How did you hear about us?”
While it might seem obvious to ask customers how they heard about your business, a surprising number of small businesses overlook this key piece of information. Whenever someone walks through the door, gives you a call, or makes a purchase from you, take the time to ask how they found you. Their answers will reveal what marketing methods are bringing in actual traffic. You might be surprised at how much you learn from this simple method.
Tracking Tip #4: Use coupons to track every single offer.
Coupons are an excellent way to track business. Include a unique coupon for each offer you make in every medium. For instance, if you’re offering 30% off landscaping services in September, use one coupon code for your newspaper ad and a different one for your postcard mailing. Then you’ll know which method brings in more customers and/or a higher ROI. If you run your business completely online, offer unique coupon codes for each promotion. By doing this you can easily see which promotions are more effective than others.
Tracking Tip #5: Review results regularly.
At regular intervals–once a month, once a quarter, or twice a year—review all your results. Look at the big picture, and identify which offers are most successful. Make them the backbone of your marketing program, but don’t stop there. The market is always changing. Continue to test and track new offers regularly.