Welcome to Guest Blogger, Pam Ricker, Ricker & Associates!
What do most business owners anticipate when they start a marketing campaign? Increased sales, brand recognition, customer exposure to new products or services? Most owners aren’t thinking about their business financial statements when they create the campaign. But, they should be! Why? What can financial statements tell you about marketing? The answer is easy – everything.
First off they will tell you how much money you have in your marketing budget – where are your business expenses – what can be adjusted if you want an increased amount to use in marketing. Stretching too far to market and having the results less than expected could put you into a financially stressful situation.
Then if you want to do a campaign for a sale but don’t know how much you will net on each product sold you may be hurting not helping yourself by increasing your sales. If you don’t know how much you need to make on each sale to cover costs and you set your prices too low – doing a sales campaign could increase your revenue but decrease your profits.
You also should be aware of what your return on investment (ROI) is for all your overall marketing and by each individual campaign so that you can repeat what works and either change or drop the ones that don’t. You can measure by specific campaign or by product if you keep accurate data. So how do you measure? Your return on investment percentage = Profit –Investment / Investment (result is a percentage). A common misconception in this formula is to use increased revenues and not increased profits. As I mentioned earlier you could be increasing your sales but decreasing your profits.
There are a few other numbers to look at in your financials that will tell you if your marketing is effective. For example, if you are doing a coupon advertisement – track how many people use the coupon. The number of coupons redeemed over the number distributed would give you your conversion rate for that coupon. Knowing the total sales that these customers made divided by the number of coupons redeemed will calculate your average sale made. Since you already have tracked your profit to calculate your Return On Investment (ROI) you now have a very good picture of how effective the coupon advertisement was.
This data is very powerful when it comes to planning the next coupon advertisement – If you increased each area- coupons, conversions and sales by 1% your profits would see a growth of 4%. But none of this can happen without tracking your numbers and knowing your profits. Keeping your financials up to date is vital to every area of your business including your marketing campaigns.
