On this episode of The Business Greenhouse Podcast, I talk about one of my favourite topics. I’ve got lots of favourite topics actually, but measurement is one of my favourite topics.
And that is because it is so important to measure what you’re doing, because if you don’t, you don’t know what is working, and you don’t know what isn’t working. And you are probably wasting loads of time and money on marketing that isn’t working.
And I can say this, because pretty much every client I have worked with or met, has not been measuring their marketing as effectively as they could have been. And I’ve identified quite a lot of cost efficiencies and savings. There have also been prospective clients I have met who have been wasting huge amounts of money. Like we’re talking hundreds of thousands of pounds for the bigger ones. Even some of the smaller clients I met, the solopreneurs or individuals -sometimes they’ve been wasting even £5,000. That’s a lot of money to waste on marketing, especially for a small business.
I think another thing to remember, is that’s time is also money as well. So, if you’re not measuring what you’re doing, and you’re not reporting on what you’re doing you won’t actually know if the things that you’re spending money on are working.
Set up a proper reporting system
So, with all my clients as part of the process of working together, I help them with their reporting set up so that they have a proper reporting process in place.
We create a spreadsheet with all of the strategies and tactics, and then how are we going to measure each one of those. Every month that report gets filled in, and we talk about it at our monthly review meetings.
Or, if they are running their own review meetings or quarterly review meetings with the board, for example, they’ve got all of their reports there. And what will become really obvious, is if you’re spending money on something that’s not working, you’ll know that either you need to tweak what you’re doing, or massively reduce the spend, or totally stop spending on that activity altogether.
Understand the numbers
Marketing – you’re always testing, you’re always looking at what’s working and thinking about how you can improve what you’re doing. I love stats and analyzing figures and reports and things like that. I did Economics, Accounting and Law at university, so I really enjoy looking at numbers.
I think it’s really important to understand your numbers because if you don’t understand your numbers, you’re not going to be able to grow a business successfully.
So things I like to look at, are things like:
- Spend on marketing, and how many leads I get from that.
- Spend on marketing and how many customers I get from that.
- You can then work out what it costs you to get a lead (CPL)
- You can work out what it costs you to get a customer (CPA)
- You can look at things like conversion rates. So, how many people that come to your website convert into leads, or convert into customers.
- You can also look at the return on investment, the ROI. So, that would be how much money do you get back for every pound that you spend?
- And you can look at that across different channels as well. So in the past, I’ve seen that some channels, for example, PPC, Google ads, might produce a much higher return on investment than other channels where maybe there’s less intent from the customer at the beginning.
So, that’s another really important thing to look at. What is the return on your investment? So, for every pound that you spend, how much revenue and profit is generated from your marketing campaign?
Customer Lifetime Value
Another metric that I love is customer lifetime value. I’m surprised by how many of the bigger businesses that I’ve worked with, haven’t used this as a metric – I have introduced it to them though! I have written a blog post here on customer lifetime value is so important.
So, what are your customers worth to you over the lifetime that they stay with you? For many of us, customers won’t just buy once, they’ll hopefully come back, and they’ll keep buying from us, time and time again. And repeat business is fantastic because it’s much easier to retain a customer than it is to acquire one in the first place.
So once you’ve got a customer, you want to do everything you can to make sure they have an amazing customer experience, and to make sure that they want to keep buying from you. And if they do continue to keep buying from you, then obviously the value of that customer over the lifetime that they’re with you, is significantly more than their first purchase. And so, it’s really nice to look at what that value is on average. And again, you can look at that across different channels, because then you can compare that to what the cost is for you to acquire that customer.
So, I have looked at the cost to acquire a customer for me, and I know at the moment, that the cost for me to acquire a customer through networking, is probably one of the most efficient ways. So, even though it does take time for me to build those relationships, and obviously my time is money, it is really worth it. The value that I get from my clients through networking is really, really fantastic.
So, my call to action would be, if you’re not already measuring your marketing, then make sure that that is one of your priorities in 2020. And that can be really simple. You can start with a spreadsheet, list all the things that you are spending money on in your spreadsheet, and then have a column for things like how many customers you got from that activity, how many leads you got, what it cost you to acquire that customer, and what it cost you to acquire that lead. And then, also you can look at the return on investment.
And also, in the back of your mind, be thinking about the lifetime value of that customer. Here is a blog post I have written on 7 ways to increase your customer lifetime value. And another one that is relevant to this topic on six key marketing metrics. So those are six key metrics that I think are really important for your marketing.
Do let me know how you get on. And also, do let me know if you’re already measuring your marketing and what important insights you’ve managed to get from that.
And last of all, a quick shout out to all those people who are supporting me with this challenge, and like my posts on LinkedIn. Thank you all. It does mean a lot. And I hope you are finding these valuable and that they’re helping you with your business.