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The last quarter is an important time for business executives and marketers. It is the time of year for assessing overall marketing performance so the right decisions can be made for the coming year. If this isn’t the very first thing you do when developing a marketing plan for the year ahead, make this the year it is. 

Why Marketing Outcomes Analysis is Important

The goal of marketing is to become more profitable. We achieve this by choosing the marketing tactics we utilize strategically. 

We get it. You probably receive at least one phone call or email a day from someone who wants your marketing dollars. It is unwise to say yes to every marketing opportunity you receive because it may not be a good fit for your organization. But how do you know when it is a good fit? You analyze ROI. ROI, or Return On Investment, is a strategy for measuring the efficacy of a campaign. For example, if you create a direct mail campaign and send it out to a targeted mailing list, you should track the new customers you received from that campaign. 

While you should monitor the efficacy of your campaigns throughout the year, Q4 is typically when most businesses create their marketing plan for the coming year. Knowing how each campaign performed overall will help you make wise decisions on what you do for marketing in the new year. If a campaign failed to meet your desired outcome and bring profit, you should consider moving the marketing dollars you invested in it to something else. 

How to Measure Marketing Campaign Efficacy

The easiest way to determine if your marketing campaign was a win or a loss is to look at it in dollars. In order to do this, you must determine your Customer Lifetime Value (CLV). Each customer is worth a certain amount to your business from a compensation standpoint. The CLV is the total revenue you generate on average for each new customer throughout their relationship with your organization. This number can vary greatly, so we must preface the word, average. 

Here is an example of how to calculate your CLV assuming your business is a taco stand. First, determine your average customer charge. In this example, we will say this amount is $10. Next, estimate the average amount of times a customer will return for tacos over a 12-month period. Let’s estimate they come back once a month, bringing in $120 per year. Last, determine how many years that customer will continue coming to your stand. If the average customer remains loyal to your business for two years, you can determine that your CLV is $240. 

The next number you need to determine if your Customer Acquisition Cost (CAC). This is calculated by dividing your marketing expenses by the number of customers acquired during that time period. If we go back to the direct mail campaign, you would consider how many customers at $240 each it would take to make a profit over what you spent on the campaign. If the campaign cost $5000, you would need at least 21 new customers for it to have been a success. 

Understanding these critical numbers will help you make strategic marketing decisions that result in a greater profit for your organization. We recognize that it can be challenging to identify or predict what will or won’t be effective. Marketing success is extremely dependent on a variety of factors including but not limited to your geographic location, target audience, product or service type, and messaging. What may not have worked in the past, may work in the future with some tweaks. Working with a marketing consultant can help take some of the guesswork out of developing a marketing plan, so you can predict significant growth in 2020. Want more marketing tips? Visit our marketing blog.