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MY ARTICLES

WHAT SHOULD WE MEASURE WHEN WE EVALUATE OUR MARKETING EFFORTS?

What should we measure when we do the ROI analysis of our marketing initiatives? There is a ratio that I like and that gives a good basis for reflection, that is the cost of producing a customer.

If we take the total amount of the money involved for a given marketing activity, and we divide that amount by the number of customers that this activity has produced over the same period, we than have a ratio that gives us the cost of producing a customer.

This ratio makes it possible to evaluate, with no emotion involved, and in a more precise manner, between the different marketing techniques used by your company. But it has its limits. It relies heavily on the accuracy of information you use; forget an important cost, and one technique may be more efficient than another. But it is a basic, and unbiased way to clearly look at your different strategies.

Another source of error is to not differentiate between your types of customers. What I mean by that is if you are a graphic designer for example, you will have customers who come to see you only for a logo and who don’t return. And you have customers who regularly use your services and give you a good volume of business. So not all customers contribute in the same way to your profitability. It must be taken into account.

You might have an advertising technique that has a very favorable customer product cost, but that produces customers who buy in small quantities. In comparison, there are advertising strategies that may be more expensive than other options, but the type of client they produce is significantly more profitable for your business. These strategies must then be favored.

If you have any questions or comments, please do not hesitate to contact me.

 

Stéphane Elmaleh-Riel, B.Ed., MBA
Marketing consultant