As we
start a new year, it's time to review the past year - what worked, what didn't;
what should be repeated, what can be improved - and put a plan in place for the
improved results this year.
Lead
generation programs are probably the easiest to measure - the goals and results
are easy to measure. You did state the number of leads you planned to generate,
and measure the number generated by each campaign, didn't you? If not, don't
make that mistake again!
Remember
our formula for the number of leads you need to generate for the year:
Leads = Revenue Goals / Average Selling Price.
(Note:
if you sell multiple products in one sale, replace ASP with average deal size or
average transaction amount.)
Tracking
campaign results is also straight-forward. For online campaigns, use a special
tracking URL for each campaign (or each cell in a split-test), then measure
these with your log analyzer or other tracking software. For snail-mail or
telemarketing campaigns, use a special offer code or contact name, and instruct
your fulfillment house/telemarketing staff to track these (on pain of payment)!
We want
to go beyond just comparing leads wanted to leads generated, though - the real
measure of success is sales! By tracking our campaigns all the way through to
the final sale, we can determine the true effectiveness of our lead generation
programs, and the return on our lead-gen investment.
For
online sales, you can use affiliate software or specialized tracking software
that tracks the lead source (that tracking URL) all the way through the final
sale. (Many log analyzer software companies now offer higher-end packages that
offer these capabilities.)
For
feet-on-the-street, catalog and telesales, you need to track your campaign or
offer code in your sales force automation, telesales or sales system. These all
allow you to track a campaign or lead source code - you just need to be sure it
is entered when the lead is generated! If you are submitting the leads to sales,
just include your campaign code. If leads respond directly to telesales or
sales, ensure that they are required to enter this information.
Ideally,
you want to track as much detail as possible - even the specific lists, offers
and creative strategies used in a split test campaign. It may be difficult (or
impossible) to track this level of detail all the way through your SFA system. A
reasonable compromise is to track each campaign through to the sale, and to
track intra-campaign detail yourself. This will allow you to optimize each
campaign, and replicate the campaigns that have the best ROI.
And,
speaking of ROI, my favorite measure of campaign success is the "quasi-ROI"
derived from:
"ROI" = (Revenue - Total Cost of
Sale) / Campaign Cost
This
allows you to accurately compare campaign effectiveness (and avoid great
campaigns that cost more than your profit margin) without being unduly
influenced by factors beyond your control.
Another
great measure is lead generation costs as a percentage of revenue generated:
L/R = Campaign Costs / Revenue
Finally,
it's important to remember that new customer acquisition is the most expensive
thing most companies do. And, by comparing the value of the first sale to the
costs of generating the lead, that's exactly what you're measuring. If you have
significant follow-on revenues from existing customers - say, 40% of your
catalog customers make 2 additional purchases in the 18 months following the
initial sale, or 70% of your licensed software customer pay an ongoing annual
20% maintenance and renewal fee - then you should also run these calculations
using your projections of the Total Customer Value - the revenue you expect to
generate, on average, over the lifetime of your relationship with each customer.
Good
luck in your marketing and sales endeavors in 2004!
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