How to determine if your marketing is working through the lens of accounting.

Dear Reader,

Do you measure your marketing results?

According to The Yellow Social Media report 2020, a survey of 2,012 Australian consumers and 1,020 small and medium-size businesses (SMBs), Only 31% of SMBs measure their return on investment (ROI) for social media.

That’s almost 2 in 3 people who don’t measure their results.

Considering that, 79% of SMBs manage their social media internally, 14% outsource some work to service providers. and 8% of SMBs fully outsource.

That’s a lot of Time and Money Invested without an ROI.

Many Small Business owners and sometimes marketers are still puzzled with the concept of measuring marketing results.

It just sounds like what bean counters would do.

But that’s not the point of this exercise. The reason we want to measure results isn’t because we want to reduce expenses, but because we want to know where we get the most returns on our investment.

And I’m not talking about vanity metrics: likes, shares, and comments.

I’m talking about Measurable marketing that affects the bottom line...

Measurable Marketing

First things first, let’s make sure we’re on the same page about what we are optimising for.

Are you optimising for your Brand, Audience, or Wallet?

The metrics you track must be relevant to your goals. For the purpose of this article, let’s talk about metrics that optimize for your wallet.

Tracking Your Marketing Metrics

Now, let’s dive into the fun part—marketing metrics to grow your wallet.

These metrics are used whenever you are Advertising.

Cost Per Lead (CPL): This tells you how much each Lead cost you to acquire. ( e.g., Get their contact information)

Conversion Rate: This tells you how many of your Leads are taking the desired action (e.g., making a purchase, signing up for a newsletter).

Customer Acquisition Cost (CAC): This is the total cost of acquiring a new customer, including all your marketing expenses.

Return on Ad Spend (ROAS): How much revenue your marketing efforts have generating compared to the cost. Revenue earned for each dollar you spend on advertising

Note: Whenever I refer to a “lead”, that’s a prospective customer/client that you can contact and remarket to. This works for both Product or Service Business.

Bridging Marketing and Accounting

This is where the magic happens.

When you integrate your marketing data with accounting, you can get a full picture of your business’s financial health and marketing effectiveness. Here’s how:

Revenue Tracking: Use your accounting software to monitor revenue changes during and after marketing campaigns. If you see a spike in sales, chances are your marketing is hitting the mark.

Lifetime Value of Customer (LTV): Does your marketing increase your Customer Lifetime Value? Increases your Average Order Value? and Does your Customers spend more money on your Business? On Average how much does your customers spend in your Business within the lifetime of your Relationship?

Expense Analysis: Keep a close eye on your marketing expenses. Compare your Customer Acquisition Cost (CAC) to the lifetime value of a customer (LTV). If your CAC is multiple times lower than the LTV, you’re on the right track. If you know that each of your customer/client will potentially spend Hundreds of Thousands during your Business Relationship or they will keep coming back for your product/Service. It’s safe to say that spending Hundreds to get in front of them and get a chance to deliver great results, is a reasonable investment.

Using Tools to Simplify the Process

There are several tools out there that can help streamline this process:

Google Analytics: Great for tracking website traffic and conversions.

CRM Software: Tools like HubSpot, Zoho, or Salesforce can help manage customer data and track marketing efforts.

And finally,

Measure, Test, and Optimize.

This is an ongoing process. Regularly review your metrics, Test your marketing campaigns, and Optimize for better results.

I hope this gives you a clearer picture of how to determine if your marketing is working through the lens of accounting. If you have any questions or need further insights, feel free to reach out!