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Is your advertising working or are you throwing your money away?

As a marketing consultant and the owner of an advertising agency, I am constantly asked how can a business measure if their advertising campaign is producing positive results  . Here are five  ways to find out:

1. Are you seeing an increase in prospects and sales beginning when you launched your new advertising campaign? Are your prospects and sales up 2%, 5%, 10%, or more? Make sure you monitor all of your prospects and sales so you can clearly see the outcomes of your advertising.

2. Are prospects contacting you because of your advertising campaign? The way to learn is to ask every prospect how they heard about you and you need to track the answers so you know precisely exactly where each prospect (and sale) comes from. Was it your website? Was it from an advertisement  you placed? Was it from a direct mail marketing campaign?  Was it from a radio spot ? You need to track exactly where each lead and purchase comes from so you understand which marketing channels are  producing results   and which are not working.

3. Are previous and present customers buying much more from you? A quality advertising campaign can bring  past  clients back again and increase the buying frequency of current customers.

4. Are you seeing an increase in referrals? A high quality advertising campaign will get your existing customers and your target marketplace talking about you. This will lead to an increase in referrals.

5. Is your advertising campaign profitable? Advertising is an investment and the lifeblood of your business. For your business enterprise to be successful, your advertising campaign must be profitable over time. Nevertheless, there are a lot of different thoughts on how to figure out if an advertising campaign is profitable. Here is the correct way to figure out if your advertising campaign is profitable:

When determining if your advertising is profitable, you need to look at advertising as a long-term investment, just like purchasing stocks, real estate, or mutual funds. When evaluating your advertising you need to take into consideration repeat sales from every single new client your advertising produces. Nearly all businesses generate the vast majority of their sales and profits from repeat sales, NOT first time sales. Understanding this principle is one of the secrets to creating a prosperous organization.

For example, let’s say you run a small quarter page ad in your local shopper coupon magazine. This modest ad costs $300. From that single ad you attract 3 new customers who each  purchase  $50 worth of your products.  From that info you would think that you had a loss of $100 on that ad due to the fact you paid $300 for it but you only produced $150 in sales. But let’s look at the long-term effect of those 3 new customers.

Let’s say that each and every one of those 3 new clients buys an added $250 of merchandise from you over the following 11-months.  Once you take that into consideration, your $300 ad has now generated $900 in sales. And, what if every single of those three customers purchases an extra $300 of items from you the following year? Now, your original $300 ad has generated $1,800 in sales over a 24-month period. To put that into perspective, if you bought $300 of mutual funds and in 2-years your $300 investment was worth $1,800, you would be jumping for joy! That is why you need to view the profitability of your advertising on a long-term scale, not on a short-term 1-2 month scale. Advertising is an investment to produce long-term clients and repeat product sales. Your focus as a enterprise proprietor must always be on producing faithful long-term clients, NOT one-time sales.

Let’s broaden the picture a lot more. Let’s say one of your 3 new clients loved your merchandise so much that she instructed two of her friends about you, and her two buddies each turns into a long-term consumer of your business. And, what if those two good friends each buys a few hundred dollars worth of merchandise from you over the next couple of years? Do you now see the large long-term value of that $300 ad you placed?

Now that you possess a better knowledge of advertising as an investment, it is crucial that you track the source of each new client (i.e., did they find you in the yellow pages, direct mail, radio, World wide web, etc.). Whenever you speak to a new customer you need to ask the buyer, “How did you hear about us?”  Then, you need to track the source of that buyer in a spreadsheet or a CRM system and monitor how many product sales each purchaser makes over time. This is the only way you can really ascertain if an marketing strategy is working. Yes, this will take time but it is really worth it. And, a excellent CRM software can make this tracking really easy.

In summary, before you throw in the towel on your advertising tactics simply because they are not instantly generating a profit, you have to first fully grasp the value of a new customer over time. Stop looking at advertising as a short term expense and start seeing advertising as what it truly is — a long-term investment to the success of your organization.

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