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.
