In my previous article I went through setting up Google Analytics, now I want to talk to you about why it is so important to track your marketing. Let me start with an example.
Judith is a mobile beauty therapist – she’s not sure what to do about her marketing, but she decides to spend £100 per month on acquiring enough customers. She chooses to spend £210 on a Yellow Pages listing per year (comes to around £17.50 per month), a half page advert in a local magazine (full of adverts) for around £70 per month, leaving her around £12.50 which she decides to spend on AdWords, bidding up to £2 per click.
Judith gets two customers in her first month, so it looks like the adverts are costing her quite a lot of money – sadly she doesn’t know for sure where they are coming from, so she decides to keep it as it is, but not spend any more money on advertising.
Why is this wrong?
This is the kind of thing that happens all the time, if you don’t track your advertising, then you can’t work out which adverts are working and which ones aren’t. In the above example it it probably more than likely that word of mouth will increase her sales rather than advertising after month 1.
If you start recording where your sales come from, you can work out what it costs to acquire a customer from each source separately. Google Analytics helps you to do this, by allowing you to track goals. If you can find a profitable advertising campaign, you can begin pumping money into it, knowing that sales will increase in proportion to the advertising spend.
Why is this important?
Ok lets say you setup a Google AdWords Campaign and you track it in Google Analytics, initially your budget is £30 per month, but Analytics shows you that for every £1 spent you earn £20 in sales, so you max out your budget, and hey presto, the end of the next month you’ve spend £300 on AdWords, but your sales have increase from £300 to £6000. You can keep finding new advertising campaigns and do this over and over again – the maths is the same.
Great In Theory
What I mentioned can be true, especially if you are in an uncompetitive market, your perhaps your competition aren’t up to scratch. But many times you come up against two types of people on Google AdWords – people that are bidding too much because they don’t know what they are doing and are losing money and the other group, which know exactly how much a customer is worth through the lifetime of their relationship with the customer, this is the kind of competitor you will need to compete with.
In order to compete with them effectively you need to learn or estimate how much your customer lifetime value is. In most industries customers make more than one purchase, and it is not unknown for companies to break even or even lose money on the first sale in order to acquire a customer.
Advertising like this is expensive, and can make it difficult when you are just starting out, as it requires a large amount of capital. So you will need to work hard on other areas, such as SEO, where many companies (even big companies) are still lagging behind.