Marketing has long been thought of as part art and part science. While creative and innovative thinking still plays a major role throughout the process, a wide range of post-modern tools are now available to bring more and more science into the equation. Companies with leaders who embrace these tools will enjoy a distinct advantage of the competition. With the marketing landscape evolving at lightning speed, there are a number of key concepts that CEOs need to get their arms around in order to execute a focused, productive and profitable marketing effort. Here are ten to consider.
What is my cost per lead?
The fact is, too many CEOs have no idea what it costs to obtain qualified leads and convert them to bona fide customers. Before calculating your true cost per lead, you need to gather up all the costs – from all departments – that are dedicated to the generation of leads. These are not only the production and media costs generated but also include many other soft expenses that often are overlooked. It’s equally important for your organization to reach a consensus on what constitutes a qualified lead. Does it include anyone who puts a business card in a fishbowl at your tradeshow booth or the tire-kickers you never really had a chance of selling in the first place? Once all of the expenses are accounted for and you’ve separated the qualified from the non-qualified leads, there is a corollary need to put effective systems in place to track the overall new-business lead generation effort – while quantifying your marketing value add. Fortunately, there are a plethora of Web 2.0 tools available for you to do this in a low cost, efficient way. Until these questions are answered, it’s impossible to figure out what a genuine lead is truly costing you. This is key knowledge for determining the investment needed to produce the desired levels of leads, sales and income for the years ahead.
What is the lifetime value of my customers?
There’s a tendency to underestimate the cost of prospecting for new customers. What’s even more dangerous is the tendency to underestimate the bottom-line effect of losing a loyal customer.
Let’s suppose your average customer spends about $1,500 in a year. If your average gross profit is 30% – and the typical customer stays with you for 5 years – that customer is worth $2,250. If your company is spending more than $2,000 each to attract new customers, you may want to rethink your strategy. When an enterprise employs these kinds of metrics, it tends to place greater emphasis on customer service, retention, and long-term satisfaction and far less on the mad rush to maximize short-term sales
How should I determine my marketing budget?
Too often, companies base their marketing budget on what they did last year – with a little something extra to account for inflation. After all, the business was decent, so the marketing plan must have worked in some way, shape or form. This generalized kind of thinking just doesn’t cut it anymore in today’s lean, unforgiving economy. A company needs to take a look at what has really worked – over a one-, two- or five-year timeframe – based on detailed quantification of previous results and return on marketing spend. The old saying goes: “Half the money I spend on advertising is wasted. The problem is, I don’t know which half.” In this new millennium, it’s more imperative than ever to convert marketing from an art to a science. To know what your efforts are costing in each specific channel. And to have an equally clear picture of what those efforts are adding to the sales pipeline and bottom line.
What is the optimal channel mix to maximize my marketing ROI?
Aggregate and industry averages can offer ballpark ideas on how to construct a marketing channel mix. However, an effective optimization process depends on a number of factors. The first step is to determine which channels best fit the communication and engagement profile of your target demographic. Is it time-pressed executives who prefer the ‘cut-to-the-chase’ nature of search engines, email, and RSS? Technicians, who place great value on trusted trade pubs and e-zines? Teens, who go into withdrawal without their Facebook and Twitter? Or seniors who spend little to no time on the Web? Once you’ve made these determinations, it’s time to take a hard look at the performance metrics of the various options within each medium. Additionally, these metrics can vary according to specific sub-markets, seasonal considerations, and so on. The more you drill down and clarify the possibilities, the more you can optimize your channel mix toward maximizing return.
What is my return on marketing investment?
Return on marketing investment (ROMI) has arguably become the most significant metric for a company to track and monitor. It’s certainly a statistical area that CMOs need to have under their command to maintain real credibility in the boardroom. Short term ROMI is a relatively simple index. This calculates the revenue dollars produced – and/or market share and contribution margin – for every dollar of marketing spend. On the other hand, long term ROMI indices often include less-tangible results such as brand awareness and the overall market value of the enterprise – all of which enables enterprises to prioritize marketing and other investments on a more empirical basis.