As we mentioned in the last article, investing in a channel to get significant data or statistical significance is paramount — this is the best way to learn how well any marketing effort is truly influencing your business.
Once you’re getting some return on that investment, you may start to wonder, “How do I know if this is really working?”
The simple answer: Measure it.
If you want to know what works, you have to build a logical system of order to track the performance of your marketing. This means using analytics and a customer relationship management platform (CRM) to track clicks, phone calls, social media interactions, cost per sale, cost per lead— you name it.
From here, you can see:
- Where the good leads are coming from
- The relationship between marketing channel, lead, and jobs booked
- Where the best margin jobs book originated
Calculating a Return on Investment
A few simple equations can make all the difference in understanding your marketing better:
1. Cost per Lead
Divide the number of leads you acquired by the total marketing spend. This gives you a cost per lead. Do this for each marketing channel (Facebook, Google, Home Advisor, etc)
2. Cost per Sale
Following suit, divide the number of sales you acquired by the total marketing spend. This gives you a cost per sale.
3. Lead to Sale Conversion Rate
This calculation will tell you the percentage of leads, on average, that convert to sales.
Take your number of leads acquired over the last 30, 60, or even 90 days. Divide that number by total actual sales made for that time period. This gives you an idea of how efficient your marketing funnel is performing. If your lead-to-sale rate is really low, this is good information to know. Maybe it tells you that you’re really good at getting leads, but are struggling to convert them into sales. Alternatively, you could find that you’re great at closing sales — it’s more leads that you need.
Average Order Value
What is the value of your average job? What is the margin on that?
Customer Lifetime Value
How valuable is the average customer to your business? Knowing this absolutely requires tracking — and that’s easy when you use a CRM. You can see how Mr. Jones spends with your company — when he buys, how often he buys and how much he spends when he buys.
You can also track softer metrics like quality — does Mr. Jones complain? Or does he love your service?
Knowing the disposition of a customer like Jones will also help you understand the labor cost of serving him.