The secret to any good Marketing program is that for every dollar you spend, you must recover that dollar and then some. You need not spend any money on Marketing Strategies that don’t make you money.
Before you do ANYTHING, you need to determine the value of a single lead or a single visitor to your website. How much can you afford to spend getting just one person to look at your business?
You don’t want to guess – there is actually a formula to this!
Here are three metrics that can help you develop a smart web marketing strategy:
|1.||Cost per Action (CPA)– how much does it cost to achieve one action (subscription to a newsletter, a sale, a lead)?To find out what your CPA is, take your advertising costs and divide by your number of buyers.CPA = Advertising Costs / Buyers|
|2.||Profit – how much money do you make from advertising? Profit is truly the bottom line number. Most businesses want to maximize profit, but it can be difficult to maximize when there are several moving parts. Increasing advertisingwill bring in more customers, but you have to make sure it will increase your profits. To find Profit, take your amount of revenues and subtract your costs.Profit = Revenues – Costs|
|3.||Return on Investment (ROI) – what is the rate of return on your investments in marketing? ROI is the measure of how effective your advertising is. For every Marketing Dollar you spend, you should get it back in sales plus some. Most businesses prioritize their spending based on how much payback it will yield. Sometimes businesses set a goal or a minimum threshold for the payback. Each business is different. To find ROI, take your Profit and divide it by your advertising costs.ROI = Profit / Advertising Costs|
When you take all three of these components together, it will be easier for you to determine your proper marketing strategy.
Example 1: If your ROI is 1000% and your CPA is one cent, but your profit is $10, that’s not too exciting.
Example 2: However, if your ROI is 50%, your CPA is $10 and your profit is $5000, that’s a little more exciting.
As this shows you, ROI and CPA alone can’t determine how effectively your advertising dollars are performing. If a campaign has little ROI, you could still invest in it as long as it generates real profits.
Knowing this, you can make money EVERY TIME you launch a marketing campaign – you will have unlocked the secret to having an unlimited marketing budget. You can spend as much as you want, as long as it makes you more money!
How much should you spend on marketing? The rule of thumb is to invest approximately 3% of your annual gross revenue into Marketing: capturing new leads, closing sales and retaining your current clients. You should also have about 10 different marketing strategies working for you at the same time. Marketing strategies don’t have to cost much – or anything for that matter.
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