How Do You Judge The Effectiveness Of Your Marketing Efforts

To evaluate your marketing efforts you should know at least three things:

1) How much did you spend on the marketing effort, regardless of what it is.
2) How much income did you generate from the marketing effort.
3) What is the Lifetime Value of each customer to your business?

I'm sure you usually focus on point #2 above, the immediate dollar return in services sold, right?
Do you ever focus on the value of each new customer you develop during these marketing efforts?

(The Lifetime Value of a customer is an amount you should calculate as the average income generated by each customer over the average number of years they buy from you).

Today, we will limit our focus to point numbers 1 & 3.

Let's say you spend $300 on marketing effort  #1 which brings in 14 new customers and you spend $50. on  effort #2 which brings in only 3 new customers.

At this point, you would assume that effort #1 was very effective, and #2 was not. ----- NOT TRUE!

Consider Return On Investment:
Time to examine the actual numbers from these marketing efforts more carefully. What we're looking for here is your "Return on Investment" or  ROI.

To determine your ROI, subtract the cost of the marketing effort from the "customer value" generated by this marketing effort and then divide that result by the same original marketing cost.

• Let's say that we know that we had a cost of $300 for marketing effort #1, and we had a cost of $50 for effort #2.
   
• Next we need the Lifetime Value of your customer.
   Just for easy figuring, let's say that a customers' Lifetime Value is about $500 -- (Note: This just a number we are using for easy figuring)

See the Special Note box at the end of this article

ANALYSIS:
Effort #1 brought in 14 new customers who have a Lifetime Value of $7,000 (14 x $500). And effort #2 brought in 3 new customers with a Lifetime Value of $1500 (3 x $500).

($7,000 - $300 = $6,700.) ÷ by $300 ( Cost of #1) = $22 ROI

($1500 - $50 = $1,450.) ÷ by $50 (Cost of #2) = $29 ROI

So, marketing effort #1  returned you $22 per each $1 invested.

And marketing effort  #2 returned you $29 per $1 invested.

From an ROI (Return on Investment) standpoint effort #2 looks much better now--it produced a much higher ROI.

But here's the bottom line: Both of these marketing efforts paid for themselves, brought a Return on Investment, and income that gets added to your overall monthly income.

It really doesn't matter if one brought in $7000 and another brought in $500, as long as they each make a positive contribution to income. Every bit of income contributes to your overall financial success. Think of each marketing effort as a faucet that contributes to your income container.

As long as the marketing efforts,  First, - pay for themselves and Second, - bring in additional Return on Investment, they are valuable to your business.

CONCLUSION:
There's only one way to judge your marketing's effectiveness and that's by the numbers. Not by opinions or guesses. Every month take a few minutes to review your marketing investments and your ROI and make your decisions based on your numbers. That way you'll know that you're making informed and profitable decisions.