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The 5 best ways to determine if your advertising is working

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Posted by steve on May 21, 2011 at 7:43 am

As a marketing consultant and the owner of an advertising agency, I am often asked how can a company tell if their advertising campaign is working . Here are 5 techniques to find out:

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

2. Are leads contacting you due to your advertising campaign? The way to discover is to ask every single prospect how they learned about you and you need to track the answers so you know precisely 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 monitor exactly where every lead and sale comes from so you see which marketing channels are  producing results   and which are not producing results.

3. Are past and current customers purchasing more from you? A high quality advertising campaign can bring  past  clients back again and increase the purchasing frequency of existing clients.

4. Are you seeing an increase in referrals? A quality advertising campaign will get your existing customers and your target market 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 to be successful, your advertising campaign must be profitable over time. Nonetheless, there are quite a few different views on how to determine if an advertising campaign is profitable. Here is the correct way to ascertain 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 new client your advertising produces. Practically all organizations earn the vast majority of their sales and profits from repeat sales, NOT first time sales. Understanding this concept is one of the secrets to creating a successful business.

For example, let’s say you run a small quarter page ad in your neighborhood shopper coupon magazine. This little ad costs $300. From that solitary ad you attract 3 new clients who each  purchase  $50 worth of your products.  From that data you would think that you had a loss of $100 on that ad because you paid $300 for it but you only generated $150 in product sales. But let’s glimpse into the long-term impact of individuals three new customers.

Let’s say that every one of those three new clients purchases an additional $250 of items from you over the next 11-months.  When you take that into consideration, your $300 ad has now generated $900 in gross sales. And, what if every of those three clients purchases an extra $300 of products from you the following year? Now, your original $300 ad has produced $1,800 in product sales over a 24-month period. To put that into perspective, if you purchased $300 of mutual funds and in 2-years your $300 investment was worth $1,800, you would be leaping 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 generate long-term clients and repeat sales. Your focus as a business enterprise proprietor must constantly 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 three new clients loved your items so much that she told two of her buddies about you, and her two good friends each turns into a long-term consumer of your organization. And, what if those two close friends each purchases a few hundred dollars worth of merchandise from you over the following couple of years? Do you now see the large long-term value of that $300  advertisement  you placed?

Now that you possess a better understanding of advertising as an investment, it is critical that you track the source of every single new client (i.e., did they locate you in the yellow pages, direct mail, radio, World wide web, etc.). Every time you speak to a new customer you must ask the customer, “How did you hear about us?”  Then, you need to track the source of that customer in a spreadsheet or a CRM system and monitor how many sales each buyer makes over time. This is the only way you can actually figure out if an advertising strategy is working. Indeed, this takes time but it is really worth it. And, a great CRM computer software can make this monitoring quite easy.

In summary, before you throw in the towel on your advertising approaches simply because they are not immediately generating a profit, you have to first recognize the value of a new client over time. Quit looking at advertising as a short term cost and begin seeing advertising as what it genuinely is — a long-term investment to the success of your company.

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