By Adrian Swinscoe, Director, RARE Business
Business growth is based on a combination of customer acquisition and customer retention strategies depending on the stage of your business. Are you measuring the marketing return on your investment (ROI) in each of these areas?
Recently I read Joseph Jaffe’s new book Flip the Funnel (it’s a great read) and there was one bit, in particular, that made me think really hard about understanding the ROI of our different marketing efforts. Early on in his book Joseph asked what percentage of your marketing budget was allocated to different areas and what was the return on that investment. His point was to try and highlight how ineffectual the traditional methods of marketing can be. The areas that he started with were:
- Awareness – e.g. advertising, brand etc
- Search – e.g. internet search (SEO, SEM), website, directories, catalogues etc
- Promotion – the cost of different promotions and discounts
- (Trans)action – e.g. ecommerce site, Point of sale merchandise and display materials, merchant service costs etc
Now, the majority of these elements are focused on new customer acquisition and if you have been reading this newsletter for any length of time you will know that I am a greater fan of growing your business via your existing customer base first and foremost. It’s the fix the leaks in your bucket idea before you go trying to put more water into it. This approach applies more to existing businesses with established current and historic customer bases than it does to start-ups or early stage businesses.
Now, I do believe that traditional marketing methods have their place but if we are measuring what we are investing to acquire new customers what about our investment in keeping our existing clients?
So, assuming you have an established business, I believe we should be throwing the following areas into our marketing ROI mix as well. Doing so will highlight where and how we are focusing our efforts on our existing customers and what return we are getting. The areas that I believe we should be including in our mix are:
- Retention – e.g. any activity (newsletters, visits, hospitality etc) that helps us to retain clients for longer
- Loyalty – e.g. programmes which offer different types of hard and soft benefits to loyal and returning customers
- Service – e.g. any activity that improves the service, delivery and interaction with our customer bases
- Experience – e.g. activities (premises, CRM systems, shop or restaurant layout etc) that improve the overall experience that a client has with our business
What do you think? Which of these areas are you involved in? Are you measuring the RoI on each area?
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