How do you measure the success of a marketing campaign?

JOHN WANAMAKER, ONE of the marketing greats, famously said: “Half the money I spend on advertising is wasted; the trouble is I don’t know which half”.

While this was understandable a century ago, when it was first said, it should be a crime to say that today. Yet, the reality is that most small businesses do little if any tracking of advertising. Not measuring where your leads and sales come from and not tracking ROI on ad spend is the mark of an amateur. We all have at our disposal the technology to quickly, easily and cheaply track advertising effectiveness.

Tools such as toll free numbers, website analytics, and coupon codes make this trivial. Remember, what gets measured, gets managed. Be ruthless with your ad spend by cutting the losers and riding the winners. Obviously, to know what’s losing and what’s winning. You need to be tracking and measuring. This is vital because media is by far the most expensive component of your marketing spend. It’s the bridge that connects your offer to your target market. Whether you’re using traditional media like radio, TV and print or newer digital media like social, search engine optimization (SEO) and email marketing, you need to understand the idiosyncrasies of each.

Its well beyond the scope of this post to go into the technical details of each category and subcategory of media. However, I’d give you this piece of general advice: hire experts that specialize in whatever media you decide is right for your campaign-they’re worth their weight in gold. Don’t try to do it yourself, especially when it comes to the most expensive part of your marketing process. What you don’t know WILL hurt you. Whether you’re using online media like social, email or web, or offline media like direct mail, print or radio, each has its own idiosyncrasies and technicalities that you’re highly likely to mess up if you’re not experienced with it. It would be a tragedy to get the target market and offer right and then have your campaign flop because you messed up a technical detail in your media.

I’m often asked questions like, “What’s a good response rate for direct mail?” or “What kind of open rate should I expect when doing email marketing?” The expectation is that I’ll give a numerical answer. Something like, “Expect a 2% response rate from direct mail” or “Expect a 20% open rate for email.”

Usually, these kinds of questions come from well-meaning business owners who have yet to build their marketing infrastructure, My answer is always the same-it depends. Sometimes a 50% response rate is a disaster, and sometimes a 0.01% response rate is a massive success. Response rates will vary dramatically depending on factors such as how relevant the message is to the target market, how compelling the offer is and how you came about the list you’re marketing to. Instead of asking what a good response rate is, which is a nonsense question, they’re really asking, How do I measure the success of my marketing campaign?”

So, how do you measure the success of a marketing campaign?

For the impatient, here’s the short answer: did the marketing campaign make you more money than it cost you? Another way of putting it is, what was the return on investment (ROI) on the marketing campaign? If it cost you more than you made (or will ever make) on this campaign, then it’s a failure. If it cost you less than the profits you made as result of the campaign, then it’s a success.

Of course, some people will argue with me and say that even a campaign that lost money was valuable because it “got your name out there” or was some sort of “branding” exercise. Unless you’re a mega brand like Nike, Apple, Coca-Cola or similar, then it’s likely you can’t afford to burn tens of millions of dollars on fuzzy marketing like “branding” or “getting your name out there.”

Rather than “getting your name out there,” you’ll fare much better by concentrating on getting the name of your prospects in here. I like to think of marketing dollars as firepower. You need to use your limited firepower wisely so that you can successfully hunt, come home victorious and feed your family. However, if you start randomly firing in every direction, you’re going to startle and scare off your prey, You need to be targeted and clever if you wish to be victorious.

If you’re a small- or medium-sized business, you need to get a return on your marketing expenditures. Putting your comparatively tiny marketing budget into fuzzy marketing would have the same effect as a kid peeing in the ocean. The game of mass marketing/branding/getting your name out there type of marketing can only be won with atomic-bomb-scale firepower. If you’re a small to medium business, that’s not a game you ‘re equipped to play. That being the case, we need to look at the numbers carefully. Let’s run through an example with some numbers to illustrate. I’ll keep the numbers small and round for the sake of clarity.

You do a direct mail campaign and send out 100 letters. The cost of printing and mailing the 100 letters is $300. Out of 100 letters, ten people respond (10% response rate). Out of the ten people who responded, two people end up buying from you (20% closure rate). From this, we can work out one of the most important numbers in marketing — customer acquisition cost. In this example, you acquired two customers, and the campaign cost you a total of $300. So your customer acquisition cost is $150.

Now, if the product or service you sell to these customers makes you a profit of only $100 per sale, then this was a losing campaign. You lost $50 for every customer acquired in this campaign (negative ROI). However, if the product or service you sell makes you a profit of 3000 per sale, then this is a winning campaign. You made $450 for every customer acquired (positive ROI).

Obviously, this is a simplistic example, but it illustrates how irrelevant statistics like response rates and conversion rates are. Our primary concern is the return on investment, which varies based on the customer acquisition cost and how much actual profit a marketing campaign yields.

One of the massive advantages of targeting a niche is that your marketing becomes much cheaper. Targeted advertising ends up being much cheaper than mass marketing because there is far less waste.

If you’re selling photography of newborn babies, you’d be far better served advertising in New Mother Magazine than in putting a general photography ad in the classifieds.

Your customer acquisition cost will drop dramatically because your message to market match is much better and hence your conversion rate will be much higher than if you had a general message in your ad.

Your advertising costs would also be lower because your target market is smaller. Remember the entire goal of your ad is for your prospect to say, “Hey that’s for me.’ Trying to be all things to all people is unlikely to garner the same reaction.

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A marketing consultant trying to write on subjects ranging from persona; finance to child psychology. As founder of Marketing Realm, I help businesses grow.

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Adil Zafar

A marketing consultant trying to write on subjects ranging from persona; finance to child psychology. As founder of Marketing Realm, I help businesses grow.