Management of Marketing Performance to Make Every Marketing Dollar AccountableSales and marketing management is a complex topic. Marketing management is the business function responsible for getting, keeping and building relationships with customers. This involves making decisions about sales and marketing strategy and developing the appropriate marketing mix. It involves management of product categories and market segments. It controls distribution methods and selling processes. How well you manage sales and marketing is critical to your success in business.
Despite the importance of management of sales and marketing performance, the accountability of the marketing departments and marketing efforts in most businesses is minimal. Most businesses spend money on marketing without requiring a specific return on their investment. Many people are simply happy to spend money "to get the name out there." This is a flawed concept.
Management of marketing performance is difficult when you don't track marketing results adequately. The complexity of sales and marketing activities leads to the difficulty in measurement and management of sales and marketing performance. To bring any meaning and effectiveness to this process, we first need to simplify what marketing is about. Management of marketing performance is so much easier if you boil marketing down to its three basic aims;
- attracting potential customers (marketing or lead generation),
- converting potential customers into actual customers (sales or lead conversion) and
- retaining customers who purchase repeatedly (repeat sales or customer retention).
All sales and marketing activities are directed towards one of these objectives.
When the complexity of marketing is taken as a whole it is sometimes difficult to see what to measure and how to measure it. When we break down the entire marketing process into three objectives, it is much easier to understand what needs to be measured and how to do it.
There are three influences on the effectiveness each aspect of your marketing;
- what you are selling,
- who you are attempting to sell it to and
- how you are communicating what you have to sell to them.
The fact that there are three variables in the process makes it tricky to develop meaningful measures. However, the fact that you have narrowed the process down to three variables means you can manage marketing performance if you develop marketing metrics relating to each of the variables. Managing marketing performance is then a matter of testing different approaches by only changing one of the variables at any one time. Managing marketing performance is basically a process of testing different methods and discovering which work best. If you only change one variable with each test you will learn something. If you change more than one variable, you won't know which change to attribute any improvement or deterioration in results to.
Lead Generation
Lead generation is the process by which you attract potential customers. The most important influence on your ability to measure the effectiveness of your lead generation is to accurately capture and record the source of each lead. For example, when someone comes into your store, or calls on the phone, you want to ask why they came to you. The answer will be from a particular ad, or because of a recommendation from a friend, or because they were just going past and saw your sign, or any number of things. You must record this information and analyse it frequently, to track the response rates to your advertising and to see what has the most influence on your market.
If you have a number of different ads in a particular media, try to engineer the response in such a way as to be able to identify which ad generated the response. For example, in a newspaper ad you may include a coupon they need to bring in to get a discount or a free gift. From a direct mailer, they need to bring in the letter or a coupon, etc. You need to make it easy to record this information, or your sales people will not record it accurately.
If possible, try to automate the process in some way, or make it part of your sales routine. For example, make sure you always provide computer generated quotes on templated forms which have a field for the enquiry source, which needs to be completed. Analysis of this information will enable you to identify your results in various areas such as product offerings, communication styles, advertising media, etc.
The purpose of all this recording and analysis is to identify which of your ads are profitable and which are not, so that you can make more intelligent decisions about where to advertize. This will tell you which ads work and which don't.
Lead Conversion
Lead conversion is influenced by your selling methods, pricing strategies, guarantees and warranties, financing options and credit policies, etc. Each of these variables can be tested at various points to determine optimal levels. The two common metrics to measure in this area are the conversion rate of number of sales from enquiries and the average sale value. You may also want to break these measures down to analyse results from various product categories and market segments.
Measuring your conversion rate and average sales value will help you focus on developing strategies to increase both measures. Most of the effort in attempting to increase sales is usually directed towards increasing the number of enquiries. However, if you are aware of your conversion rate and average sale value, you will often see that it is much more effective to improve your conversion rate to increase sales with no added marketing cost or without increasing work loads.
If your conversion rate is in the order of 4 sales from 10 enquiries, your sales revenue can be increased dramatically without any more enquiries being generated, if you can simply increase your conversion rate to 5 out of 10. Such an improvement would result in a 25% increase in sales volumes with no additional outputs. You can see how important this metric is.
Increasing your average sale value is also another simple way to dramatically increase sales results. You need to discover how to increase your margins on each sale. Sometimes this may be as simple as increasing your prices. Most businesses actually undervalue their worth to customers and try to compete on price alone. Adding value to your product will allow you to get out of the price wars and compete at a different level, where profit margins are healthier and customers are easier to deal with.
Another way to add value to the sale is by upselling. Learn the version of McDonalds' "Would you like fries with that," that works in your business. What would complement any of the products or services you sell that you could add to each purchase to increase the value and profitability of the sale. When the customer has already decided to buy and has their wallet open is the best time to ask them for more.
Customer Retention
Tests have determined that, on average, it is six times less expensive to gain sales from existing customers than to gain new customers. However, marketing to existing customers is often an overlooked area in many businesses. There are many ways to increase sales to existing customers. Of course, it is easy if you have a consumable product that is required repeatedly. But if you don't have such a product, you need to use your imagination to come up with other products you can sell to existing customers. The hardest job in marketing is to get a new customer. Once you have done that job and have performed at a level to satisfy or exceed their expectations with their purchase, the battle to sell more is already half done. You have won the customer's trust, which is the biggest battle in selling.
The metrics you need to measure in this area are frequency of purchase and lifetime customer value. The lifetime customer value is calculated by multiplying the average sale value by the average number of times a customer will make a purchase from you over the course of your relationship with them. This number is important in management of marketing performance because it provides the basis for determining your level of investment in marketing. When you know this number you can compare it with your cost per lead from each source to identify whether it is worth the investment.
Conclusion
This is how you make every dollar of your advertising budget accountable. Ultimately, you won't have to guess when it comes to making decisions about marketing. Sound management of marketing performance will allow you to identify the best combination of advertising methods, sales methods and customer retention options to enable you to maximise your marketing effectiveness.What should you do now?For more information about managing sales and marketing performance in your business and to avoid the common mistakes that most business owners make, request our free informative business success tips by entering your details in the boxes below. You will also get immediate access to 2 free chapters of "Put Your Business on Autopilot", the breakthrough book that shows business owners the 7 step system to create a business that works so well, they won't have to. Once you submit your details, you will be sent an email to confirm your request (we don't want spam). Simply click on the confirmation link in your email to receive your free business boosting tips and free chapters of"Put Your Business on Autopilot".
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