How To Develop Clarity In Your Online Marketing – The Concept Of ‘Break Even’
Let’s assume that the number one objective for your digital campaign is to increase profits. So how do you know if you are actually making a profit?
Forget all the ‘fancy’ metrics such as Impressions, CTR, etc. The key metrics in your campaign must be Sales for eCommerce and Number of Enquiries + Cost Per Enquiry for Lead Generation campaigns.
You have to be ruthless with your assessment of profit and that means accurate tracking of your conversion actions (Number of Enquiries + Cost Per Enquiry).
If you cannot track these metrics then you should think seriously about continuing with your chosen channel of marketing, especially if you are a local business sold down the river on some ‘social media brand awareness’ waste of money exercise by your Digital Agency.
Ok, rant over!
I would like to introduce you to the concept of ‘Break Even’ so you can really dig in and see where you are profitable.
Here is an example of XYZ, a local business, and to bring in one new customer/client they actually make £500 profit. Working backwards, their sales process involves a phone call to their business (conversion) and then a meeting to close the sale. Their process is as follows:
1 new customer = £500 profit
1 new customer = 3 meetings
1 meeting = 5 phone calls
Therefore: 1 new customer = 15 phone calls
£500/15 = £33 Ad spend to generate 1 phone call to ‘Break Even’
We now have the metric of £33 as your ‘Break Even’ which means your budget in your online campaigns is to generate a conversion action (phone call) for that maximum amount.
This ‘break even’ concept is critical to understanding if your campaigns are actually profitable. You also now have a threshold and the plan of action going forward is to test ways to:
- Increase the number of enquiries within this threshold – try different advertising channels
- Decrease the cost per enquiry – increase the conversion rate of your website landing pages
- Generate ideas to earn more from each new customer/client so the lifetime value to your business is more than £500 profit – sell other services/products to the customer/client
So what is your ‘break even’ in your business for your products/services? How much ‘wriggle-room’ do you have in your online marketing campaigns to generate a new enquiry such as a phone call or a web form completion?