Measuring Response – A Simple Way to Maximize Your Marketing Dollars

Many of our clients at the Halton Region Small Business Centre come to us with questions related to increasing their cash flow without increasing their marketing expenses.  This can be a difficult challenge in some situations, but for many small business owners one simple solution is to measure the response of their current marketing efforts and use their money more effectively.

A few years ago we had the pleasure of consulting for a local small business owner who wanted to increase his cash flow.  This owner, let’s call him “Zeke”, was bringing in plenty of customers but was spending too much on his advertising.  Zeke was spending $1,500 a month on three different ads in all of the local papers, with a cost breakdown of roughly $500 per ad.

“I’m happy with my sales,” he said, “but I think I’m not making enough profit because my advertising is costing too much.  How can I keep my sales the same while decreasing my advertising budget?”

“Are all of your ads working?” we asked him.

He thought about it.  “They must be, because I have plenty of new customers.”

“But do you know for sure?” we countered with.

“No, I guess I don’t.”

We then discussed the possibility that perhaps one ad was working exceptionally well while the others weren’t doing much. “Perhaps,” we suggested, “once we know what’s working and what isn’t, we can cancel one or two of your ads.  No point spending money on ads that aren’t doing anything.”

Zeke was sceptical, but agreed to give it a try.  He put a small piece of paper by his phone, and each time a customer came into the store or called, Zeke was to ask them one simple question:  “How did you find out about us?”  He would then tally up the results at month’s end and send me the information.

After one month it turned out that almost ninety percent of his new customers were coming from one particular ad.  The other two were generating a measly five percent each.  Zeke was astonished by the results and decided to cancel the two ads that weren’t working. With almost no drop in sales, Zeke realized $1,000 in savings per month, or $12,000 for the year. Few small businesses can afford to throw away $12,000 a year, so Zeke was extremely happy.

Are you wasting money in your marketing plan? A simple way to measure the response of your ads, or return on investment (ROI), is to simply ask your customers how they found out about you. Track the results and make a plan based on what you find out. Nothing is more frustrating than throwing money down the drain on ideas that aren’t working.  Be smart, and measure your response – you might be surprised to find out where your business is coming from.

Comment on this blog – how do you measure response in your business? What marketing ideas and tactics are allowing you to maximize opportunities while avoiding overspending?

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