Thursday, April 2, 2009

Measure Twice, Cut Once

We've all heard the adage, "Measure twice, cut once", when it comes to construction and woodwork, but did you know you can use the same premise to kick start and guide your marketing efforts as well.

Reality is that most small business owners have no idea whether or not their marketing is working for them. It's not a matter of not spending money on marketing. They spend just fine. The problem lies in the fact that they don't know what they should be expecting from their investment. And unfortunately, they don't know what they should be measuring or how best to measure it, to decide whether or not it's working. So as important as it is to market your business (akin to cutting the wood), it's just as important to make sure that you are measuring what you want to improve through your marketing dollars.

Most small business owners measure one or two things: gross revenue / sales (how much did I collect) and / or net profit (how much did I make). So when they spend money on marketing, they expect their numbers to go up. But unfortunately, no matter how much money you spend on marketing, only measuring the end product will not yield the answer you are looking for, because marketing doesn't increase sales or profit - marketing increases the chances of making a sale by increasing the numbers of customers that volunteer to become potential customers. It is the entire business system, working harmoniously that builds on your profits.

An example of that is a mass-mailer campaign. If you invest $1000 in a mass mailing campaign, you would expect both your sales and your profit to go up, right? Unfortunately, business systems aren't that simple. Odd are, you increased the number of perspective customers walking through the door, but did your sales team have the skills and training in place to convert those new leads to actual sales? Was there an increase or even possibly a decrease in returning customers during that same period, because of a perceived drop in customer service (with less time and energy spent on taking care of existing customers)? Was the increase in sales large enough to compensate the increased costs of the marketing campaign?

That's not to say that measuring sales and profit aren't important - they absolutely are! However, there are other things to measure as well. The following are just a few examples of things to measure the effectiveness of your marketing dollar:

- new customers walking through the door
- number of times the phone rings per day
- number of website hits
- number of return visits per customer
- average price per sale
- number of referred customers
- where the customer heard of you

So before you go off and spend all of your hard earned money on marketing - that may or may not help you - start measuring the one or all of the items above (and any others that relate to the effectiveness of marketing). This will help you determine which marketing elements are working, and which ones aren't. And give you a better sense of control over what in most small businesses is completely "out of control".

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