If I took a poll of 100 small business owners and simply asked if they knew what their ROI (return on investment) was for just one of their marketing efforts, I would estimate only 1 or 2 would know the real numbers.

Say WHAT??

Before you judge them (or me) let's talk about why that is happening.

First, there is a lot more that goes into calculating ROI than just the cost of the media placement. Let's think about that for just a moment.

How much time did it take you? How much do you pay yourself? Time x Hours = Expense
How much time did it take your staff? How much do you pay your staff? Time x Hours = Expense
What existing infrastructure was used for this? What did that cost to create? What does it cost to maintain? Infrastructure cost total / Amount used = Expense
What follow up costs will there be after the marketing effort begins? What does your tracking system cost in staff time and your time? Time x hours = Expense

Take all your ancillary expenses, even those I didn't list above, then ADD THE ACTUAL MARKETING COST and that is your total. Now divide that number by the number of leads that marketing effort generated to get your Cost Per Lead (CPL).

Oh wait, you ARE TRACKING this right?

RIGHT?

If not, let's quickly go over two relatively easy ways to track.

Aided tracking: Ask any incoming calls, emails, or foot traffic if they saw your marketing messages in any / or all of the following ways and give them the list to pick from. They can pick more than one. " Did you see my ad here or here or here?"
Unaided tracking: If you don't want to prolong the discussion or need that kind of accuracy you can simply ask, "To improve my marketing efforts, could you please tell me how you heard about my business?"

This means the second issue with calculating ROI is the lack of calculable data. If you don't track ALL of your traffic you are operating without critical information! That ain't good!

One caution, web traffic is nicely trackable but only to a certain degree! Much like the phone book got credit for all other media in the 80's, Google gets credit for being the top referrer today. The message of your business to your prospective customer began in all likelihood long before they Google searched. So while having your ranking high in Google is important (SEO/SEM) is a conversation for another day), it is equally important that you don't limit your messaging.

Once you know what the REAL COST of marketing is, you can calculate your cost per lead (CPL).

But it doesn't end here....

Nope. This is really just the beginning!

Now that we know what our CPL is, we need to calculate what a customer is worth to us in actual dollars. Looking at your sales records, what is your average sale amount? If you get repeat sales how often do they repeat? Average sale $ x # of repeats = Value of a customer.

We can now compare our cots per lead vs the value of our customer....

This can be a sad moment for some business owners.

It's okay....

Just let it all out...

That's why you are here today reading this article.

Once you've admitted you have a problem, the next step is recovery.

If your cost per lead is more than your cost per customer. STOP! Stop doing whatever it is you are doing. You are on a bad, very bad, no good can come from this, path. If this is you, stop reading and contact me for immediate help.

It goes without saying that now is the time to reevaluate your marketing efforts as well as your sales conversion efforts. You need to start the following two-fold action plan today.

Reduce your cost per lead.
Increase the value of a customer.

If, after calculating all the numbers, your cost per lead is less than the value of a customer you are doing better than most! YEAH YOU! But let's not settle, it can always be improved.

Your marketing efforts MUST remain fluid and evolving. This is not a set it once and forget it aspect of business. Your customers will be consuming media differently all the time. New things pop up frequently and just as quickly things may devolve into obscurity. Understanding how, where and when your ideal customers are using media will help you craft and curate your messaging for best ROI potential.

If you like this post, please feel free to share it! Also, if you'd like to get my new content delivered right to your inbox, please sign up below.

XOXO

Janet