Marketing: Metrics, My Dear Watson

Published on August 19, 2010 by The Editor · No Comments

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By Nathan Goldberg

You can spend a fortune on marketing and very quickly bring your business to its knees.

Why? Because you set a marketing budget. You know the sort of thing. You decide how much you can spend on marketing and then you do a spreadsheet.

Oh Joy.

And then you go wildly over budget. The bean counters move in and it’s end of days for you as creative entrepreneur. You’re now in Morecuts Jail with no get-out card.

That’s the way most small to medium sized business work. But the bigger boys, the corporates and the savvy marketers know a secret. And they ain’t going to tell you any time soon.

But this reporter will.

Forget about marketing budgets. They are a huge waste of time. You want to be profitable? Throw Excel out of the window with your accountants. Only joking.

Here’s what you have to do. You need only do this one thing.

Measure the average value of customers. Know how much a customer is worth to you. The equation in simple. How long do your average customers stay buying from you and how much do they spend.

No idea? You better find out. And if you can’t , or you are a new business then try and give it your best guess. But knowing is a lot better.

Marketing Metrics

With that information you will have the keys to the kingdom. By doing some simple market testing of whatever idea you have in mind, it gives you a metric to test against. A metric in marketing is a reference point on expenditure and profit.

Say for instance the customer is worth x. Then what you need to know after you do your marketing testing is what the marketing testing cost against how many customers it brought in. You then measure the cost against x.

Not how much money you made out of the test. That is how many businesses measure it and it is wrong. It is against the average value of a customer.

Downside. Well you may need to adjust cash-flow but the upside is incredible and it is the way to go.

How do you do marketing and how do you measure success? Are metrics important to you or are you hearing about them for the first time? That and other comments most welcome.

Nathan Goldberg, CEO of wowdewow, is a business and personal development specialist. He is glad to answer any questions at nathan@wowdewow.com.