STRATEGY

Math Before Marketing

Start your marketing strategy with math. Marketing strategy isn’t about a particular tactic or promotional effort, but rather it is a simple mathematical equation. Math in marketing is the crucial step towards having a successful marketing effort. There are three things to consider in your marketing plan to ensure success.

Cost Per Acquisition

The first step in a solid marketing strategy is understanding your spend. Before you invest a dollar in marketing, understand what you have to get out of your marketing spend to create business value. It is not only about what you can afford to spend on marketing, in fact, I would suggest it is not about that at all. Marketing is meant to fuel your organization for growth, it is a way to create profit. Creating profit requires an investment, therefore your marketing should be considered a profit center.

If you haven’t invested in marketing, or question what you are getting for your marketing spend, consider this: in the early stages of marketing, you may sacrifice your net profit margin to create larger overall net profit dollars being channeled back into your business. Identifying your marketing cost per acquisition (also referred to as MCPA or CPA), can help you to know whether your marketing is working or not. Your CPA creates a guiding principle on the maximum spend you are willing to accept to acquire a single customer and remain profitable.

Often times companies start marketing their business and miss the step of understanding their spend and therefore either don’t believe it is working or don’t understand what they are getting for their spend. This creates the false sense that marketing doesn’t work. Marketing does work, but ineffectively measuring outcomes could be disastrous.  

Let’s say for example you have a marketing spend of $1000, and a target CPA of $100. You choose to invest your dollars (based on your personas – a persona is a composite sketch of your ideal customer, it helps to identify what channels your customers are likely to be looking for your product or service) in a direct mail campaign. You have a list purchase of $50, which then brings you to $950 in available dollars for your mailing. Each mailing costs you $1, for both printing of your post cards, letters, or other pieces as well as postage. You mail 950 pieces in the market and you get a response rate of 2% (creating 20 leads), your conversion rate (of lead to sale) is 60%. You have acquired 12 customers for your spend of $1000, bringing you a CPA of $83.33, well within your target of $100. In this example, this program works. Keep investing. The reality is when you begin testing marketing strategies you may not hit the mark on your target CPA out of the gate, but it doesn’t mean with the right testing strategies that you won’t get there. Most marketing channels can work for any business, measuring each channel is critical to getting results.

Measuring leading indicators like response rate or open rate are important, but at the end of the day measuring performance back to your CPA will determine whether or not it was successful.

What Gets Measured Gets Results

Having a clear way to identify the effectiveness of each campaign back to your CPA target is critical to knowing whether your marketing efforts are succeeding. Relentlessly evaluate how you measure the effectiveness of your marketing efforts with persistence and consistency.

Each marketing campaign (a campaign for the purpose of this article is a channel of distribution to reach your target audience) should have a clear way to measure its CPA impact. This methodology for investing can apply to all forms of marketing whether it is email marketing, pay per click, direct mail, SEO (search engine optimization) and so on. It creates a very clear picture of what is working for you and what needs additional refinement to create profit.

My philosophy on marketing is that if you can’t measure it, don’t do it. There are several platforms that will enable you to measure your effectiveness, Hubspot being one of them.  Be diligent in understanding how you will measure each spend prior to starting.

Testing Marketing Channels

Everything you do in the early stages of a marketing effort should be considered a test. Consider employing A/B testing methodologies or the scientific method using a control to continuously refine and measure your results, only changing one variable at a time. Often times, I hear programs or initiatives didn’t work. My belief is that most all things can work, it is a matter of testing the right changes to deliver results.

Say for example in PPC (pay per click), if your clicks are low, perhaps you aren’t targeting the right keywords or your call to action message is off. Each of these items should be tested independently. Next, perhaps your offer isn’t compelling. If you are getting clicks with limited response, perhaps your landing page isn’t strong enough or one variable of your landing page needs an adjustment to drive response. You get the idea, continuously test your efforts against a control, which means while you may not be getting the result you want, keep investing and testing until you do. Once you have identified a channel meeting your CPA target, that has been measured effectively,  tested and iterated multiple times, invest as deeply as you can to acquire as much of that channel as you desire. You now have a winning marketing channel. This is what I refer to as performance marketing.

Putting it all together. Begin with understanding your cost per acquisition. Identify channels that meet your personas in their likely media. Test relentlessly. Remember marketing is a math problem, not a strategy problem.

AUTHOR

Chris Ruley
Chris Ruley
Vice President of Strategy

Christopher Ruley is the Vice President of Strategy with Valve + Meter Performance Marketing. He has a passion for achieving results and measuring performance to deliver tangible outcomes. Christopher has more than 15 years experience developing and leading business strategies across a variety of verticals and sizes.