Return on Investment
Every marketing campaign that you launch, online and offline needs to be measured and quantified so you know if it’s effective or not.
That’s the benefit of using direct response marketing.
It’s critically important to determine a way that you can pinpoint how each prospect and customer finds their way to your business. If you’re not doing that now, you’re making a big mistake.
Your marketing is successful if it brings you prospects. If you’re not able to convert these prospects to customers, you might have a sales problem, not necessarily a marketing problem. However, if your marketing incorrectly it could bring you prospects that aren’t really qualified to buy your services or products.
The formula for measuring the cost of your marketing campaign is very simple. It takes into account the net marginal income per inquiry or prospect as well as the cost to acquire each customer.
What this means is you need to write down the total cost of the ad, sales effort, commission or whatever you’re doing to get that person in the door. Now write down how many inquiries you received or how many prospects you generated.
Take the total cost to acquire a lead and divide it by the total inquiries. This gives you the average cost per prospect.
Write down the number of customers generated from those prospects. Take the total cost of the a lead, and divide the cost by the number of customers you got.
Now you know the average cost it takes to get a customer, the average sale per prospect, and the average sale per customer.
This gives you your net income per prospect and per customer.
Now you know how profitable this campaign was. Or if it was profitable at all.
Here’s to Your Success,
Tim
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