Increase Profits from Your Marketing Campaigns

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For most small business owners, having effective marketing campaigns that consistently produce favorable ROI's is more important than ever. Although that may seem rather obvious, the factors that contribute to profitable marketing or advertising campaigns may not always be as obvious. In this article I will review the steps that I use in my own business as well as my clients, to make sure marketing goals and objectives are met and the campaigns produce profitable returns. Hopefully they will benefit you and your organization as well.

Planning
Before any marketing campaign is even considered, you must determine what it is you want to achieve. As obvious as this question is, I frequently consult with many small business owners that do not even consider this when they begin their campaign. Many people assume that as long as you are spreading the word, you will get business from it, so it's all good. In reality it may play out that way sometimes, but often times it does not. Even if the campaign was profitable, it might've been more profitable with better planning and tracking.

Thinking in Reverse
I have a methodology that I practice in nearly every situation where a specific end result is desired, regardless of the topic. You start with exactly what it is you wish to achieve and then break down into the various incremental steps or milestones that would need to be achieved to accomplish that goal. In this particular scenario, let's say that a hair salon owner wanted 40 new customers per month. Let's simplify things to say 10 new customers per week. This shop has had its best marketing success using direct mail. They have found that approximately 50% of people who initially call actually show up for their appointment. Some people call for questions and pricing but did not make appointment while others make appointments but don't show.
So the bottom line is they need to generate 20 inbound calls per week to get 10 new customers. They have also determined that approximately 1% of the postcards they mail will generate a phone call. Therefore they need to mail 2000 postcards per week which will generate 20 calls and 10 new customers. As a side note, without having this important conversion statistics, there would be no way to calculate the effectiveness of this campaign which I will cover in more detail shortly.

Tracking
Some people may say the tracking should come after the implementation because how can you track something that has not yet started. That may be, however it is important to decide how you are going to track your leads and have the system in place to accomplish that BEFORE the campaign starts. That is a critical factor. Your tracking might be something sophisticated such as a software application or an Excel spreadsheet, but it can also be something as simple as a hand-drawn table with columns or something of that nature that you could make copies of. Ideally you would want to track the time and date of the call, the result of the call and the amount of revenue that each customer generated. Those are the most important factors to consider when evaluating the effectiveness of a campaign and also deciding how it can be improved.
There are 3 major ways you can increase your profits and revenues. Once you have an understanding of these principles and how they can be implemented in your business, you begin to realize the various ways they can be implemented to increase sales, revenues, and profits.
1. Increase the Number of Customers or Clients That You Have
Although this may seem like the most obvious solution and the one that many business owners pursue first, it is usually the least effective overall because of the marketing costs associated with acquiring that customer. In general it costs several times the amount of getting a new customer versus retaining a current customer. Depending on the type of business you have and the cost of your marketing campaigns, you may not even realize a profit on the first sale. However since all businesses lose customers through natural attrition, it is important to have this component as part of your overall marketing strategy.
2. Increase the Average Transaction Size
Increasing the average transaction amount simply means having your customer spend more money each time they make a purchase. Let's say in your business, the average sale is $50. By establishing trust and building stronger client relationships, you could raise that amount to $70. You have effectively increased your revenues by 40% (non-math people just trust me on that one) and your cost of doing so was minimal in relation to the cost of acquiring a new customer. Building stronger client relationships also has some serendipitous effects of lower attrition rate and increased referrals, both of which at your overall net profit.
3. Increase the Frequency in Which Customers Purchase From You
Simply put, this means you want to inspire or incentivize your customers to make purchases more frequently. Let's say that your average customer makes a purchase once every other month or 6 times per year. By getting them to purchase once per month, you have effectively doubled your revenues assuming that the additional sales were approximately the same dollar amount. That would be a significant increase but even if you were to get them to make a few extra purchases per year, you could still give your bottom line a boost. You might think in terms of quarterly special promotion for existing customers or some other type of customer referral or incentive program. I have seen these types of offers work very well for many businesses.
All 3 of the strategies listed above should always be used. Depending on your business and the type of marketing you are using, some may be easier or more cost-effective to implement, but they all have benefits and can work synergistically when utilized together, to increase profitability.

Implementation
Once the proper campaign strategy has been selected and the method of tracking has been established, it is time to initiate the process. There are some details to consider with regards to when you plan to launch your campaign. If you have a brick-and-mortar store, you will want to make sure that you have adequate staffing on the days your promotions and specials are running. You may also want to check your inventory of supplies that may be needed during an influx of business. Nothing will ruin a campaign quicker than not being able to fulfill on the sales you are generating during the campaign.
If you are on online only business, you may want to verify with your hosting company that this promotion doesn't coincide with any planned downtime they may have. Depending on the nature of your business, you may also want to consider some additional temporary staffing to answer phones or respond to e-mail queries. The quicker you are able to respond to your potential clients and customers, the less likely they are to visit your competitors for the answers they seek.

Calculating ROI
Even if you are mathematically challenged, calculating your return on investment (ROI) does not have to be complicated. Here is the basic concept. Marketing ROI is simply a ratio of the net amount of money you made from the promotion compared to the amount of money you invested. For the sake of example, let's say the total revenue from a particular promotion is $1000. The cost of the promotion itself was $200 and it required approximately $100 of your time or your staff's time as part of the process, so your true cost was $300. If you take $1000 might assure cost of $300 these are profit of $700. That $700 profit divided by your $300 cost equals 2.33. To keep things simple that means you received $2.33 for every dollar invested in the campaign. If you want to think in terms of percentage, you will need to multiply that times 100 which yields a ROI of 233%. Refer to the illustration below for a graphical representation of what I'm talking about. It may help you to remember the simple formula.



That is ROI in its simplest terms. There are many other factors that can be considered to make the campaign even more effective which will be the topic for an upcoming blog post so stay tuned.