Hold the Gin. Pass the Spreadsheet.

September 2nd, 2008 Chris Posted in Financial, Marketing | No Comments »

I spent a bit of time over the long weekend prepping for my first class tonight. I am teaching this term at the University of Ottawa’s MBA program – specifically on Strategic Marketing.

I always get a bit frustrated when talking to people about marketing as most assume it’s pretty much the same as advertising. The image many have is a bunch of people in a conference room engaging in random right-brain exercises. It almost sounds like a party. In fact, back in my former job, we actually used icons of stick men with martinis (shown here for your enjoyment) as a representation of marketing.

The reality, of course, is much different. Marketing is a discipline and the objective of my first class this week is to ensure that the myth is put to rest.

One of the simplest ways of doing that is to ask: What is the most important tool a marketeer must master?

My answer is the spreadsheet. Especially in a micro business, you cannot effectively market if you can’t master Excel. You simply can’t manage what you can’t measure.

And what is one of the most important things you need to manage: your Return on Investment (ROI). In other words, your job is to maximize the revenue you get from your marketing investment.

A real life example from our business is Google AdWords. We use AdWords to advertise on a bunch of sales-related key words. What we do is we advertise a free ten day eCourse with ten of Colleen’s best sales tips. Then we offer folks that take the eCourse, a membership in Colleen’s monthly sales coaching program (where we start making money).

So we need to determine our investment:

     = Click throughs  x  click through cost

And we need to determine our return, first with the number of customers we get:

     = Number that click through  x  % who sign up for the eCourse  x  % who purchase the coaching program

And multiply that by how much revenue each customer is worth. In our case:

     = Average number of months a customer stays in the coaching program  x  per month charge.

That is a fair bit of math, but it’s critical to determining if the investment in AdWords is worth the return.

First of all, it’s critical to ensure you’re getting more revenue back than you are investing. I took us literally months to determine the best strategy for our use of AdWords. For example, originally, we tried to get people to purchase the coaching program right from the ads but the conversion rate was too low – we were losing money. We then moved to the multi-stage conversion with the eCourse and voila – we made money.

There is definitely a right-brain part to marketing and that makes this measurement stuff even more critical. In our example, prospects will respond differently to different Adword ad wordings. So we have a couple of ad variations and we measure to see who each one performs. So now we’re doing the math above twice.

And we have different landing pages from the Ad with different text for the eCourse sign-up. So now that’s 2 x 2 = 4 different sets of numbers.

In other words, we continually test and refine our marketing to discover what works best, implement it, and do another test. You can only figure this out by running the numbers.

This applies to all your marketing. Every marketing effort needs to be likewise tracked. Every article and ad we use has a unique tracking code so that we can determine how many people click and if they ever buy something. Otherwise, we’d literally be guessing if we were making or losing money (aka gambling).

Are you measuring your marketing? If not, then you’re not managing it. Write down a list of all your marketing investments in descending level of investment. Start at the top, fire up Excel and start measuring. I bet you’ll be surprised at the results.

C.