If you could generate a 409% return on your marketing investment, how much money would you spend?
As much as possible, right?
For every £1,000 spent, you’d get £5,090 in return.
I can’t imagine being wealthy or drunk enough to think that was a bad idea.
So imagine my surprise when a client recently said that they’d decided to stop one of their direct marketing campaigns because it wasn’t generating a high enough return:
And growing – the clients that the campaign generated will spend money year after year. In 6 months’ time the ROI will have increased to around 500% even if our client doesn’t spend another penny on marketing.
In two year’s time it could be 1,000% ROI, and climbing.
This reminds me of three critical factors when planning your marketing investment:
You must, must, must measure your results
This client was fantastic at working with us to establish their return on their marketing investment. They shared information that enabled us to help them establish which clients they’d gained as a result of their marketing efforts, and then to calculate how much those clients have spent so far.
It’s important to analyse those figures correctly
If you have profitable sources of new business, why turn off the tap in one area? As long as each lead generation effort makes you money, have as many fingers in as many pies as possible – especially when, as in this case, someone else is doing all the work and all you need to do is pick up the phone and take the money. In this instance, the client was looking at how much each new client cost and comparing it to the cost of new clients they gained through Google. What they haven’t done is wait long enough to see how much the clients from different sources spend. We know that the clients we generated are spending around £300 each year, with a lifetime value in excess of £3,000. A good friend’s business went bust some 20 or 30 years ago when they ran tests in different national newspapers. The Sun generated a far greater response than any of the other papers, so they cancelled all their other advertising and ploughed all of their money into advertising there. What they failed to realise was that the people who responded to an advertisement in The Sun didn’t convert, i.e they didn’t spend any money.
All the data was there – they just interpreted it in the wrong way, and it cost them dearly. The same rules apply now, and across all media. Do you want lots of clients with a low cost per acquisition, or do you want clients that spend lots of money? They might not all come from the same place so proceed with caution before you make too many assumptions about what the data is telling you.
If your marketing is working, why change it?
How many times have you stopped doing something because you’re bored of it? Your prospect has probably never seen it before, and for them it might be extremely relevant and perfectly timed – but you’ve seen it over and over and you think it’s time for a change. Bad move. If it’s working, and it’s making you money – keep doing it. This is not an excuse for becoming lazy. You should always try and improve on your response rates through testing, but that’s different to ditching a whole campaign simply because it’s a new quarter / season / year and your boss expects you to run something new.
For those of you that think you can’t afford to test / measure – you’re wrong
If you don’t at the very least measure your response to your marketing efforts, how on earth are you ever going to know whether to repeat something, or stop it? I spoke to one client this week who paid another company quite a lot of money to insert 30,000 generic leaflets into a pack with lots of other generic leaflets and was disappointed to have not had a better response. His product is fantastic and he’s leagues ahead of his competition in the way he goes about his business – but you’d have to be a mind-reader to glean any of that from the leaflet he sent out. He’d be infinitely better off sending a smaller, targeted pack to his prospects and explaining to them why his product would be good for them. It’s possible he’d spend more in the short run, but I’ve no doubt the response would more than justify the extra time and effort.
If you’re about to embark on your next marketing project, talk to us first.
Maybe the campaign you’ve run previously can be improved upon? Maybe your last campaign didn’t perform quite as well as it has in the past?
Perhaps, unlike our other client, a 409% return on your investment sounds like a good place to be?
Either way – we’re hungry for new challenges. If we can’t beat the response rate of your last campaign, I’ll buy you lunch. I’m not talking about a Happy Meal – I mean somewhere with plates, and cutlery.
And speaking of testing, I’m adding this CTA (Call To Action) below because I know it pulls twice as many enquiries as the other variations we’ve tested:
Arrange a consultation
Talk with Cliff Lay, managing director of Proactive about how we can help you with any direct marketing projects