A purchase is an exchange of value: I give you $5,000 in exchange for a backyard storage shed. You pay $50,000 for a piece of equipment, and in exchange, the dealer delivers and installs the equipment and teaches you how to run it. My wife pays the grocery store $100, and in exchange, the store allows her to walk out of the store with a cart of groceries. When we pay money but don’t think that we received the same or equal value in return, we feel cheated.
When business owners spend money on marketing, they worry about not getting anything valuable in return. That’s because it’s often hard to see what we got in exchange for our money. Decades ago, businessman John Wanamaker said, “I know half of my advertising dollars are wasted. I just don’t know which half.”
Testing and measuring your marketing is a first step to solving this problem.
Simpler than you might think
Does tracking your marketing investments seem impossible? You are not alone. Many small business owners feel that way. It is common for business owners to think, It’s just not worth the effort, or I have no idea how to go about it, or I don’t think that would work for my business. Tracking return on investments feels like a big mountain to climb, and they push it to the bottom of the “to do” list.
What you need to realize is that testing and measuring help solve the problem of knowing how and where to spend your marketing dollars.
The good news is that testing and measuring your marketing do not have to be difficult or time-consuming. In fact, the work is so simple that you as a business owner should not be doing it yourself. Your employees should be doing this for you.
However, you will need to give them direction on how to do it. I can hear you now, saying, “How am I supposed to tell them how to do it if I don’t even know?!” This article and the next one in the series will show you how to begin using a simple system that you can train even your newest hire to do.
Benefits of implementing a system
When you implement a system—even a simple one—to track the source of your leads, patterns begin to emerge. For example, you will notice that you get more leads from one source than you do from another.
As you begin to see a clearer picture of what is working and what is not, you can make better decisions. You can continue doing what works and change or discontinue what is not. You can borrow from what works to experiment with fixing what doesn’t work.
One company had attended a certain trade show for years. Because they had a system for tracking how many leads converted into customers, they realized that their ROI on that show was trending down. They tried a few things to reverse the trend, but eventually, they decided to stop going to the show, even though the show itself was booming. It was no longer the best place to invest their resources.
Depending on your business, you may only capture information on a small percentage of your customers or your sales. But even a percentage is better than flying completely blind.
What are testing and measuring?
Testing is designed to answer the question, “What produces the most results?” Testing is experimenting with different approaches. Testing doesn’t work without measuring.
Measuring is designed to answer the question, “What results were produced?” Measuring consists of collecting and organizing data to reveal useful information.
This is oversimplified for a large business, but this is where small businesses should start. Doing this well puts you miles ahead (or dollars ahead) of the average small business.
The three main categories of marketing—lead generation, lead conversion, and branding—should work in harmony for the best possible results. Small businesses should focus their testing and measuring only on lead generation and lead conversion.
Large national brands do put money into testing and measuring branding campaigns, but small business brand-building initiatives can be guided simply by using common sense.
Let’s look now at testing. We will save measuring for the next article.
How to test your marketing
There are multiple ways to generate leads and multiple ways to convert those leads into paying customers. Testing helps you find which ways work best.
Testing to improve lead generation. You should track how many leads are generated from each of your lead generation channels. How many of your leads responded to your printed ad? Your yard signs? The envelope stuffers your business friend kindly included with his invoices?
You can use this information in two ways. First, you can determine which channel generates the most leads. If a channel isn’t yielding enough leads, you can discontinue it or change your tactics. Second, you can make changes to a channel and determine whether the response increased, decreased, or stayed about the same.
For example, let’s say you have run a print ad four times promoting pedal tractors. Then you change the ad headline from “Best Quality Pedal Tractors” to “How to Make Little Boys’ Eyes Shine.” All other factors being equal, four issues later you can determine if one headline produced more leads than the other.
Testing to improve lead conversion. You should also track how many leads are converted into customers as a percentage. The equation is the number of sales you made divided by the number of leads.
You might have multiple lead conversion tools such as brochures, videos, product samples, and sales demonstrations. Let’s say you replace all the photographs in your sales brochure. Of course, you are expecting it to be an improvement. How will you know the results of that change?
Granted, testing lead conversion tools is sometimes more subjective than testing lead generation channels. However, if you are constantly tracking your conversion rate you can watch to see what happens when you make a change to one of your conversion tools. Are more leads choosing to buy? Less? Or about the same?
Sometimes the goal of conversion tool improvement is not about increasing the conversion rate. Rather, it’s about saving the salesperson time. Improving your conversion rate while simultaneously reducing the time spent with a salesperson, for example, by providing information that answers the top ten FAQs, is a win-win.
Testing to attract your ideal customer. Some leads are not a good fit for your company. Once converted to customers, some leads spend more than others. Some leads have a problem that you can help solve, but your solution isn’t quite what they were looking for. Leads that are a good fit for you are called qualified leads.
Tracking leads from your different channels shows you which channels provide the highest percentage of qualified leads. If one channel consistently delivers leads that are not well-suited for your business, try changing the messaging in your ads or move your ad money into other channels to reach an audience that is better suited for your product.
Tracking the dollar amount of sales (or gross margin) from each customer and matching that up to the lead source allows you to see which channels or ads bring in the most revenue (or most profitable customers).
Online A/B testing. If you have someone running online advertising for you, ask them about A/B testing. Web platforms today offer a feature that allows you to change one aspect of an ad or one aspect of your website (B) and compare its effectiveness to the original (A). For example, if the ad’s call to action reads “Learn More” you could run an A/B test to see if changing it to “Shop Now” causes more people to click the button.
A/B testing can also be done in some offline applications as well.
Elements to test
Are you ready to try testing and measuring? Here are some elements of your marketing that you can consider testing to see if they impact results:
- Call to action
- Advertising a specific product(s) versus a general ad for your business.
Other aspects of sales and marketing that you can experiment with and track the results:
- Follow-up calls or emails
- Answering common objections
- Sales process/asking for the sale
- Quote/proposal presentation
- Adding live chat to your website
How to collect the information
How do you know how many leads came from each of the various lead generation channels you use? Here’s the simple answer: ask them!
Whether your customers call you, email you, walk into your store, or meet you at an event, you can ask them. You can ask them in conversation. You can ask them on a form they complete. You might even “ask” them by including a code in your advertisements that they give you.
My favorite version of the ask is, “How did you hear about us?” Maybe this will fit your style or maybe it won’t. It’s important that you find a version that you are comfortable asking. Create a few variations of the wording and try them. Choose one that feels natural for you.
You also need to determine where in the conversation it is appropriate to ask. Does it fit best in the first thirty seconds? Halfway through? Or at the end? It should feel natural and unobtrusive to the lead. You might need some time to get comfortable asking. Your discomfort is fine. You want to pay attention to the comfort of your potential customer. Do they show negative body language or facial expressions or does the conversation keep flowing smoothly?
Once you have the information, it needs to be recorded. A retail store that sells sewing machines and vacuum cleaners keeps a paper at the front counter. When someone calls or comes to the counter, they ask the question. Then they write the name and the channel on the paper. Some variation of this method works well for most businesses. It can be done on paper or digitally.
Some businesses use paper or digital forms to collect other information from the lead so they can generate estimates or quotes. These forms can be a good place to record the lead source.
It’s important that someone is charged with the task of regularly tallying the records, whether it be monthly, weekly, or even daily. They should generate a report showing each lead source and how many leads were generated in the period.
We measure results in nearly every other area of business, so why wouldn’t we measure it in marketing? Buying a machine that doesn’t pay for itself is a poor investment—so is buying marketing that doesn’t show results. Testing and measuring are important because they help us steward our resources.
Testing and measuring are simple in concept but not always easy in execution. However, unless you test and measure, you will have no way of knowing whether your marketing is getting better or worse, or whether it is effective at all.