Is My Marketing Article originally from June 30th, 2017 FPC Newsletter
Written by John Linton
Is My Marketing Working?
One of the most prevalent questions that I get during my coaching calls is “Is my marketing working?”. To understand the answer to this question, we must first understand the purpose of marketing. Marketing has one purpose; to make potential clients interested enough to contact you (“make the phone ring”). Marketing does not impact show rates, or close rates. It simply creates an opportunity to engage a potential customer that has expressed and interest.
Knowing that, we need to examine each marketing media independently. So, if I am using the newspaper, post cards and a monthly publication, I want to evaluate them each independently. As an example, let’s take post cards. If a post card mailing costs $2,000, and it generates 15 calls, is it working? The answer is YES, but how do we determine that. First, we need to calculate cost per lead. The cost per lead is the cost of the publication divided by the number of leads. In this case, it would be $2,000/15 or $133 per lead. Now you know the cost per lead, but how do we know if we can afford to pay that much per lead. Well, we know that for traditional marketing we should be getting at least one pre-education attendee scheduled per lead call (remember, not every caller will schedule but many will bring guests). We should have a 50% close rate at out talks and another 50% clos rate at our ROFs. That translates into 1 package for every 4 leads or a marketing cost of $532 per package sold. If our average package is $5,000 and our costs are 24% or less (as taught) that means that we have a margin contribution (after hard costs) of at least $3,750. If we then deduct the cost of marketing ($3,750-$532) we have a contribution margin net of marketing expense of $3,218.
As you can see from this example, a lead cost of $133 is profitable. In fact, this practitioner could easily absorb a cost per lead of $200 or more. The key is to understand your close rates. If you are closing at less than 50% at your talk and 50% at your ROF, you need to focus there before accelerating your marketing spend. Try plugging in your ratios, your average package price and cost per lead to see how you are doing. If you have any questions… Ask your director. The formulas are as follows:
Cost Per lead: Ad Spend / Leads = Cost Per Lead
Contribution Margin: Package Price – Hard Costs = Contribution Margin
Lead to Close Ratio 1 / ROF close% / Talk Close %
Marketing Cost Per Package Lead to Close Ratio * Cost Per Lead
Contribution Margin Net of Marketing Contribution Margin – Marketing Cost Per Package
The exception to this rule is Facebook and online marketing which traditionally have a lower show rate. As such, simply multiply your online cost per lead X2 to weight it appropriately for this calculation.
In most cases, you will see that your marketing is working better than you thought. If we can spend 10%-15% per package on marketing, we can continue to accelerate your spend. While it may be nerve racking, if your Marketing Cost Per Package is less than 15% and you want to grow your business, you will have to invest in marketing.