‘’ I know 50% of the advertising budget I spent is wastage, but I don’t know which 50%.’’
This was true 20 years back, but now things are different. Marketing has evolved with time and now a marketer can’t cover his mistakes by using this conventional saying.
We marketers today have better marketing metrics for measuring our performance of marketing plans, and we can more easily track down the results of our marketing campaigns than ever before. Okay, so boring talk is over,now I’m going to jump straight away to list of three tools we marketers can use to assess our return on investment of marketing expenditure.
1) Sales Analysis
First and foremost sales analysis consists of measuring and evaluating actual sales in relation to goals. If marketers goal is to increase sales by $50,000 by end of next year and he spent $1000 on marketing, than that means that every $1 spent brought $50 of sales. However at some point contribution will start to diminish and marketer need to realize that point, and change his techniques to end those diminishing contributions trends.
2) Market share analysis
Sales do not reveal how well the website is performing, relative to its competitors (okay it is one of the bench marks but still, it shouldn’t be used alone) and this is why marketers need to track its market share. We marketers can measure our market share in 2 ways.
a) Overall market share
It’s business sales expressed as total percentage of market share of the total market sales.
b) Relative market share
It’s expressed as market share in relation to its largest competitors, a relative market share over 100 indicates a market leader. A rise in relative market share
which can be gauged by keyword rankings, means a company is gaining on its leading competitors.
3) Marketing expense to sales analysis
This is used by marketers too check that they are not over spending on marketing to achieve their targets, because if they are, that means their return on investment of marketing expenditure will fall.
In one company, this ratio is as high as 30% and consisted of five component expense to sales ratios:
- sales force to sales (15%),
- advertising to sales (5%),
- sales promotion/discounts to sales ( 6%) ;
- marketing research to sales (1%)
- sales administration to sales (3%).
Management and marketers need to closely monitor these ratios; fluctuations outside the normal range are a cause of concern. However, there are no set because that industry is declining.