Tracking What Works and ROI To avoid throwing money into the wind, you’ll need to track what’s working and what’s not in your marketing mix.
Joaquin Erazo, marketing and public relations vice president for Case Design/ Remodeling and Handyman Services, in Bethesda, Md., consults with 65 franchisees, 75% of which fall between $500,000 and $1 million in sales, so he’s familiar with marketing issues of small firms. He suggests using multiple marketing sources. Media sources include direct mail, print ads, flyers, church bulletins, radius mailings, coupon magazines or decks, and home shows. Non-media sources include past clients, referrals, word of mouth, job signs, and vehicle signs.
Using a spreadsheet (Erazo uses The Ultimate Marketing Calculator, an Excel plug-in), track the volume of leads and lead sources weekly, nailing down first-time callers on how they learned of your company. If prospects cite multiple sources, ask what most convinced them to call.
Next, calculate the cost per lead. Say you have a marketing budget of $25,000 and receive 240 calls each year. Divide the budget by the number of calls. In this case, cost per lead is $104.
It’s also helpful to break down lead numbers by marketing expense. Say a home show cost $2,500 and generated 60 leads. Cost per lead would be $42. That’s not bad, according to Erazo, so long as a good number of leads turn into jobs. (Case Handyman’s average cost per lead is $35 on job sizes that average $4,500.)
To determine which leads are the most effective, however, you need to know the lead cost per sale. Say the 60 home show leads turned into three sales. That’s just a 5% close rate and a cost of $833 per lead. Erazo, in that case, would rethink the home show. He recommends at least a 10% to 15% lead-to-sale close rate and a cost-per-sale in the $600 to $800 range (for a company doing jobs averaging $25,000 in size).
To continue with our example, a company closing 36 (15%) of its overall 240 leads, average cost-per-sale would be $694 —within the range.
By watching out for which marketing methods generate the most leads — and then, the best jobs — you can adjust the marketing mix.
David Alpert of Continuum Marketing Group of Great Falls, Va., cautions contractors that when considering marketing costs, factor in time, benefits, commissions, and overhead expense associated with fielding phone calls, qualifying and meeting homeowners, and preparing proposals.
Alpert says these costs refine where you invest marketing dollars. Most remodelers don’t account for the largest expense —labor and labor-related overhead, plus missed opportunities — that is, marketing you could have done that might have been more effective than what you actually did.
His point is it pays to invest time and money in effective marketing that allows more time to sell. A well-developed plan lowers marketing cost as a percentage of sales because of additional business. It allows you to spread marketing costs over more income.