A Guide to Marketing Costs
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The appearance of the word marketing in a company’s list of expenditures is often enough to make a financial officer take a stiff drink. The term encompasses many diverse activities each seemingly more expensive than the last and with a lower return on investment.
But when it comes to marketing appearances are obviously deceptive. Marketing costs but if it didn’t lead to new business coming in the door then nobody would do it. The trick is obviously to concentrate your marketing spend on those areas which show the most success and not to commit large amounts of capital to experimental or innovative methods that have yet to prove their return on investment credentials.
Managing Your Marketing Costs
The first tool you need for keeping your marketing budget in check is a carefully devised marketing strategy. This is a well thought out and detailed road map that outlines exactly what marketing activities you’re going to be conduct over the next 12 months, how much you’re going to spend, what your goals are and how you’re going to measure the success of each campaign.
A marketing agency can be employed for their expertise and experience in drawing up and implementing marketing strategies. This might add to your outgoings in the short term but should ensure that your marketing effort (and money) is being employed in the most effective way.
Tracking Your Marketing Expenditure
One of the most important aspects of marketing is tracking exactly how much new or repeat business is brought in and what that adds to the bottom line. This can then be used to work out which marketing campaigns have been the most profitable and should be ramped up and which have led to losses and should be abandoned.
It can be very difficult to know whether a particular customer made a purchase due to a particular piece of marketing but there are methods for tracking this:
- Websites with analytics tools can tell you the source of a particular conversion, letting you know whether it came via a Google search, pay per click campaign, email newsletter, social networking site, an affiliate’s website or directly.
- Asking new customers when they place orders where they found out about your company can be used to track offline marketing. Include a question on web order forms and get your salespeople to ask.
- Promotion codes included in special offers can be used to determine offline marketing referrals e.g. use the promotion code ‘busposter’ for free delivery.
Again, you can employ a marketing agency to run your campaigns and perform this tracking for you.
Optimising Your Marketing Expenditure
In order to work out which marketing costs are bringing in the most business you need to work out a Cost per Enquiry and Cost per Customer for each campaign.
For example, if you spent £1,000 on bus posters and got 50 visitors to your website, 40 of which went on to abandon their purchases at the checkout and 10 of which actually completed a purchase then:
Cost per Enquiry = £1,000 / 50 = £20
Cost per Customer = £1,000 / 10 = £100
On the other hand, if you spent £500 on banner ads on the web which brought 100 customers to your online shop, 20 of which converted in to sales then:
Cost per Enquiry = £500 / 100 = £5
Cost per Customer = £500 / 20 = £25
You should concentrate your marketing efforts on those areas where your cost per enquiry and cost per customer are lowest, which in the example above would mean more banner ads and less bus posters.
In summary, the key to managing your marketing costs is drawing up a detailed marketing strategy, following it closely, tracking the results carefully and using them to inform future marketing strategies. It’s a process of continual refinement and one which needs to make allowances for new trends and new marketing forms.
To get free quotes from up to 4 UK based marketing agencies just fill out our simple form.
