In the last posting you learned to make sure you had the right resources focused on sales or marketing. Without aligning your resources correctly you may be spinning your wheels, losing time and revenue in the process. Have you determined if you have the right people focused on the right tasks to increase sales? If not, look at the last posting at Sales Slump? Do You Have the Right Resources Assigned?
Once you know you have the right resource focused on marketing, you need to determine how much marketing creates the leads needed you need to hit your sales goal. To determine this you need to look at your l Marketing Effectiveness. Marketing Effectiveness is the ratio of how many leads you need to create an opportunity? Don’t confuse this with your close ratio (see Maximize Revenue by Selling Your Excess Capacity). Your close ratio is a measure of your sales people’s performance in turning your quoted or proposals into paying contracts.
The formula for marketing effectiveness calculation is as follows:
Marketing Effectiveness = Number of Opportunities / Number of Leads
Say you received 83 leads last month resulting in 37 quotes. Your Marketing Effectiveness would be as follows:
Marketing Effectiveness = 37 quotes / 83 inquires (leads)
Marketing Effectiveness = 44.6%
This is a critical metric. It tells you how well your message is communicating to your target market. The higher this percentage the better job your marketing is doing at telling your story to the right people that want to buy your product or service.
Frequently small businesses try communicating to too broad an audience. They think this helps them cut the cost of marketing. But, this causes time wasted by sales in qualifying leads and/or preparing quotes for people that will never buy. The key to good marketing is a focused message to a very specific audience. The result is leads ready to buy. Done correctly your Marketing Effectiveness will go through the roof actually driving marketing costs down.
So be careful, don’t try to do too much with a single marketing campaign, and monitor your Marketing Effectiveness closely to see how it is performing.
Next, close the loop on your sales campaign. Calculate how many more leads you’ll need to increase your sales to your quota. In the previously posted sales example 52 quotes were needed. To continue this example, use the marketing effectiveness of 44.6% calculated above to determine how many more leads you’ll need:
Needed Number of Leads = 52 quotes / 44.6% marketing effectiveness
Needed Number of Leads = 117 Leads
To generate 117 leads we need to increase our current marketing by 41%. That means 41% more of whatever we’re currently doing for marketing to reach our audience. That may mean increasing telemarketing calls, more advertising, more e-mails, more events, whatever we are doing to make the phone ring!
Marketing Effectiveness (ME) has another use critical in today’s economic situation. Savvy companies monitor ME regularly to see trends. When their ME begins to fall its time to put more money into marketing. Cost conscious companies do just the opposite and begin cutting their marketing budget. Before you know it the savvy companies have stabilized their sales while the cost cutters are in a death spiral of decreasing sales.
Do you monitor your Marketing Effectiveness? How do you track the needed variables, and with what frequency do you report it? Share your stories savvy businesses out there that have stayed in front of the current storm so others can benefit from what they know!