Understanding the Effectiveness of Your Marketing Plan

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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.