IT IS ALWAYS ABOUT PROFIT. The ultimate goal of marketing (or anything your company does) is profit. Tracking awareness, number of customers, and revenue are meaningful exercises, but your ultimate goal and business driver is profit for your company.

You must understand your margins. You should be measuring profit for each of your products/services:

1. Determine variable costs for delivering each product/service you provide (materials, labor, etc.) – Note that it may not be necessary to track costs for each product. In some cases products can be grouped.
2. Determine fixed/overhead costs for running your business
3. Allocate fixed costs across products or product groups (estimates are OK)
4. Add variable costs for each product/product group to your fixed cost allocation to determine total cost for delivering each product/service
5. Subtract the total cost for each product or product group from the price you charge. This is your product-level margin. This is an extremely valuable piece of information.

Using your product level margin data, you can better focus marketing activities:
* You will know how far you can discount products through campaigns/coupons/etc.
* You will better understand how to focus marketing activities to drive your customers to higher margin products/services

In my next post we will take this margin ‘knowlege’ and link to the marketing mix and sales funnel information.

There are a number of variations of the ‘sales funnel’. To keep it simple, the sales funnel is a visual representation of the sales cycle – how customers find you (or are drawn to you) and then how they work their way from the initial contact to becoming a paying customer.

Many large companies spend vast resources measuring each step of the funnel and determining why prospects/leads/etc. stay in or drop out. As a small business owner, the important thing is to understand where your paying customers are coming from – and link that to your marketing investments (see my earlier post: ‘Understanding Your Marketing Mix’).

You should be collecting customer information:

At some time during the transaction (sale), ask your new customer how he/she heard of your business.There is no right or wrong way to do this – the key is to collect the information and get it into a standard format (spreadsheets work nicely). Note that for many small businesses a lot of customers come from ‘word-of-mouth’ – ask these clients who referred them to you. You may be able to work backwards to tie this new business to one of your marketing efforts.

Organize the information in a spreadsheet. It could be as simple as listing the customer name in a column and then in the next column noting how the customer heard about your business (what brought them into your sales funnel).

In my next post, I will talk more about linking this customer information with your marketing investments.

It is critical that you understand how the different components of your marketing plan fit together, and this cannot be done without an effective mechanism for measuring the effectiveness of your marketing investments.

Step 1: Identify Marketing Investments: As a small business owner, you should take an inventory of all your expenses to ensure that marketing investments are categorized correctly. Some examples:

* Advertisements: mailers, e-mail blasts, magazines
* Printed signs/banners: sidewalk signs, vehicle signs
* Website costs: development, SEO
* Infrastructure: any system costs associated with delivering marketing initiatives
* Human Resources: your time and your staff’s time spent planning, developing, and delivering marketing initiatives
* Dues and subscriptions to trade or networking organizations: BNI, Chamber of Commerce
* Rebates: if you advertise a discount as part of a campaign, the discounted amount is a marketing investment

Step 2: Quantify your marketing investments:
Once you have your marketing investments identified, quantify them.
How much does each of these items cost you? Monthly/weekly/annually/one-time expenses?

Organize these in a spreadsheet. Once this is complete, you are ready to start linking for marketing mix to your sales processes. I will have more on this in my next post.

Scarlett Neal, owner of Radius Real Estate in downtown Longmont is excited about working with Longmont Business Marketing to increase her web presence.  “Moving up the search engine lists, and being found on multiple internet directories is only part of the picture”. “LBM is also helping me with video marketing of my listings, so potential customers can find my listings on Youtube as well.” said Scarlett. “We are also looking on event based marketing and article marketing to get the message out through as many internet channels as possible.”

“With the Longmont Real Estate market being a bit sluggish, it’s important to reach as many customers as possible, and for them to know that Radius Real Estate is the right choice, whether they are buying or selling real estate, said Neal.”

For more information, visit the Radius Real Estate website, or call  (303) 862-3232.

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Radius Real Estate
929 Main Street
Longmont, CO 80501-4512
(303) 862-3232

Linking your Marketing Mix data to your Sales Funnel:

1. Using a spreadsheet, list your marketing activities and costs for a specific period (can be a month/quarter or a campaign period). Calculate the percent of the total cost for each marketing activity (see my earlier post ‘Understanding Your Marketing Mix’).
2. In the same spreadsheet, list the number of new customers that purchased your products/services that came to your company or were drawn to your company through each of these marketing activities. Calculate the percent of total new customers for each marketing activity (see my earlier post ‘Understanding Your Sales Funnel’).
3. Now divide the number of new customers for each activity type into the total cost for that activity. This is your ‘cost per new customer’ for each activity type.

You have just taken a big step in analyzing your marketing plan:

• If the percent of total new customers for a specific marketing investment is higher than the percent of total marketing spend for that marketing activity, you can generally say that the marketing activity drove a high proportion of new customers – it was effective at this level.
• If the percent of total new customers is lower than the percent that investment represents of your marketing plan (or is 0), the investments did not perform.
• You can also compare the cost per new customer across the different activities (or to an average) to determine which activities bring in new customers more cost-effectively than others.

Using this information, you can make some important decisions about how you allocate marketing investments in the future.

Residual Customer Value and ROMI (return on marketing investment):

At LBM we offer tools that take this analysis further. By consolidating the model built using these instructions with the product level margin data, we can provide a residual customer value model as well as a financial return on investment for your marketing plan.

Why is this important?

• Investments made where there is little or no impact (not driving customers into your sales funnel and/or driving customers to products/services that are not high-margin), are wasted investments.
• Not making investments where there is opportunity to drive higher margins or bring in more customers are missed opportunities.

Too often business owners spend thousands of dollars contracting website developers to build them a fantastic website, only for the website to have few visits. Often small business owners are disappointed, as they expected that by having a website, new customer prospects could find it. What many small business owners don’t realize is that in order for a website to be found on the Internet, it must be marketed to the search engines and the prominent Internet directories. Similar to publishing a business add in the phone book, but on the Internet.

This can be taken even one step further by having a business-marketing firm provide what is called Search Engine Optimization (SEO). SEO is a technical process where the website is optimized so that the search engines like Google can find the business. For the “do it yourself” small business owners, there are many resources on the Internet around this topic, but the learning curve can be steep. For those non-technical business owners, you may want to consider having a small business-marketing firm provide this service for you. Most firms provide free consultations.

A word to the wise. If you walk into the Verizon store located on hover road at 1067 South Hover Road, Longmont, CO, you will see at least two large signs on the inside of their facility that say 4G network. Observed them today on 6/17/11).
Yes their select phones/smartphones will work on the 4G network, but be advised that that I was unable to connect to any Vresioin 4G network as I drove all over Longmont.
This example of marketing/advertising is disappointing indeed…

Tim Mayhew and Shane Walter, owners of Paint Pals LLC in Fort Collins started their residential and commercial painting business in 2009. They are focused on top quality service at competitive rate, as illustrated in their interview with Tom Martino:

Paint Pals believe that surface preparation, attention to detail, and quality paint products are key to the longevity of a paint job. They also are keen to keeping their overhead low so that they can pass on the savings to their clients.
Smart business management and quality services at a reduced rate is helping this company to grow quickly.

Paint Pals is working with Longmont Business Marketing to expand their business through internet marketing. “We’re excited to experience the results that internet marketing can bring to our business”, said Shane Walter.

To see samples of their work, and to get a free estimate, visit Paint Pals website at: http://thepaintpals.com

The Spot Hair Salon in Longmont has recently opened its doors at 724 Main St Unit C. The new hair salon has a very upbeat and attractive decor, and the young hair stylists there are excited about their new opportunity in running their own hair salon in the heart of Longmont.

Entrepreneurs Libby McCarthy, Karina Chumacero, Vanessa Nissen and Jaz Felton are having their grand opening celebration on Friday June 10th from 4pm to 8pm. They are welcoming the public with refreshments and appetizers. They are also offering a Grand Opening special on Friday for a free hair cut with the purchase of a hair color.

Longmont Business Marketing is excited for these young ladies, and supporting them in their salon business venture. Come down to the salon for the Grand opening, and see what The Spot Hair Salon has to offer! Visit their website at: http://longmonthairsalons-thespot.com