Does advertising give value for money?
Another quickie here.
The Question: “How can I tell if my advertising is giving me good value for money?”
Answer from me: “Test, measure, evaluate. Ask all your customers why they have come to you… put a code on the advert so you can see which sales relate to which advert.”
Find out, on average, how much it costs to acquire one or each customer. To calculate this divide your marketing cost by the number of new customers acquired.
For each advert you can establish its effectiveness by finding out how many new customers it gets you and how much it costs to get each one.
The next step is to look at how much each new customer is worth to you. Look at the gross profit of the first sale… take a punt and calculate the average life-time value (GP) of a typical customer. Is a customer worth more to you than they cost to acquire? I hope so. If not, you’ve got problems.
