Knowing what to spend on your marketing is a challenging starting point, but justifying it and measuring marketing performance against it – is the bit that often gets lost in the operational chaos.
At Clockwise, our clients are keen to prove what their marketing activity is achieving for their business, so that they can secure a greater investment for continued growth. Initial marketing investment will vary and depend on factors such as:
- the current revenue size of your business
- your financial goals
- your business sector and marketplace
- the number of competitors
- the speed of organic growth to date
- threats and weaknesses that will prevent future growth
Determining the effect of marketing on a company’s growth is not always easy, or clear. There are many variables to a successful and growing business. But with already saturated marketplaces and the rise of digital marketing channels, companies are having to fight to stay ahead of their game, and fight even harder to rise above it as leaders. What is clear, is that without any marketing, a company is unlikely to survive. Many large corporates have seen a positive correlation between marketing spend and business growth – and as a result, have increased marketing spend year on year for continued growth.
According to a 2016-2017 Gartner Research study, companies are now spending roughly 8% of annual revenue on overall marketing. Further to this a 2017 CMO Survey looked at marketing spend by industry:
The full report can be found here.
Whilst the statistics are interesting, benchmarking is not necessarily a worthwhile activity given the unique nature of each individual business and its goals. Perhaps even harder to benchmark against, is the allocation of spend to different marketing activity. This will depend on an exclusive and varied mix of factors such as marketplace, target audience and customer insights, sales pipeline, business development activity, employee morale and current brand perceptions. Whatever you decide to spend, it is imperative for the potential growth of your business and consequentially your marketing budget – to measure, measure, measure!
Measuring Marketing Effectiveness
A common way of measuring marketing performance is to set KPIs (Key Performance Indicators) to track progress in specific areas. You can create an easy to view dashboard to show your KPI data, which can then be used to work on more effective strategies and to address any weaknesses identified.
Here are our top 6 Key Performance Indicators for Marketing:
- Sales Revenue
An obvious starting point is to track the correlation between your periods of marketing activity and rises in sales revenue. This is the quickest and easiest way of seeing if your activity is bringing a return on investment – without drilling down to the finer detail.
- Conversion Rates
This is the percentage of leads or site visitors who perform a desired action versus the percentage of leads/visitors who do not. You will need to ascertain what the desired action is from your marketing activity. It could be anything such as filling in a contact form, clicking on an ad, engaging in a content piece, or actually making a purchase. Digital marketing activity is straightforward to measure with online contact forms and subscription options – but conversions become harder to measure with phone contact. You may need a reporting structure in place so that business enquiries are always measured in terms of what prompted their contact or alternatively you can set up different telephone numbers for different campaigns and then measure calls to each number.
- Total Lead Value
This is the total value of all leads who have come from your marketing activity. It gives an idea of the worth of the leads – to the business.
- Cost per Lead
Analysing your cost per lead helps you to work out which marketing campaigns perform better and which channels to prioritise in your marketing strategy. You can work out your cost per lead by dividing the cost of a given campaign, by the total number of leads generated by it.
- Average Customer Value
Your average customer value is the average sales revenue generated by each customer minus the cost of lead acquisition, multiplied by the average number of sales per customer. Knowing the average value of your customer will help you to know how successful you need to be to stay afloat.
- Campaign Return on Investment
This is the additional revenue a campaign has brought in, after deducting the cost of the marketing activity. This is a figure that you will need, in order to justify the initial spend and to secure further funding for future marketing initiatives.