In case you’re utterly unaware of upcoming pop culture or cinematic events, the second installment in the Hunger Games franchise comes out next Friday.
It’s called Catching Fire and, of course, stars Jennifer Lawrence.
The first movie told the story of a future society where every year the wealthy capital district demands that the citizens of the other poorer districts provide one young man and one young woman to participate in The Hunger Games. Basically they go into an arena and fight until there is only one left alive.
Only the strongest, smartest, and most determined ‘tribute’ survives. Everybody else dies a pretty violent death.
As brutal as this is, your marketing budget should function in precisely the same manner.
The weak campaigns, channels, and ads should die violent deaths.
Your marketing budget should be based on metrics like CPL and CPA. Research from IBM shows that companies basing marketing spend on these metrics make 40% more revenue than companies that don’t. It seems like a no-brainer. But, many marketers–and sometimes we’re all guilty of this–base their budget on things that ‘seem’ like they’re working. Or, things they believe will work eventually.
For example, as we prepared to launch Conversation Analytics, we heard from several SaaS companies that partnering with a specific publisher would be a great source for leads. We did our research and the lead demographics looked great. The parameters of the campaign looked great. We were excited! We produced a White Paper specifically for their email list. They then promoted the White Paper to their list and leads started flowing in.
This should work great!
But, after 6 months and hundreds of leads, there are very few accounts from this source. So, even though this lead source produced what appear to be great leads and these leads kept our sales team busy, the metrics simply don’t add up. Ultimately it is a CPA game and the CPA for these campaigns is terrible.
So, even though we wanted it to work and it felt like it was working, the numbers showed us that it didn’t work. At all. Thus, we have to stop marketing via this channel.
Rely on metrics not on what should work, or what you ‘feel’ like is working.
In the Hunger Games the smallest and weakest are easily killed by the biggest and strongest. The most effective kill the least effective.
Your marketing budget should operate in precisely the same way.
If you determine that Google Adwords generates more clicks, calls, and closed sales than retargeting, you should kill your retargeting efforts. Or, if our tradeshow budget is bloated and doesn’t generate leads or accounts, kill your tradeshow budget.
The first step to effectively killing your weak marketing channels is to start tracking data. Ensure that you’re combining web analytics, CRM data, and call analytics to come up with an accurate CPL and CPA. How much does a lead cost? How much does a new customer cost?
Again, make sure you’re including phone call data. Our analysis shows that while you may get fewer phone calls than web leads, those phone calls will purchase almost 10x more frequently than web leads. That means that forgetting to include phone calls in your CPL and CPA data would DRASTICALLY skew the metrics.
Once you have the systems and tools in place to gather CPL and CPA data, start benchmarking. In other words, see what your CPL and CPA look like over a period of 3 or 4 months and then, most importantly, compare that data to what you NEED it to look like to make money.
For example, if you need to spend $800 to get a new customer to remain profitable, make sure you’re only spending $800 to get a new customer. Compare your current metrics against what you NEED those metrics to be.
Once you have your benchmarking data you can start to test various lead sources. Compare organic search leads, paid search leads, social media leads, phone calls vs. web leads, phone calls from PPC vs. tradeshow leads. Compare everything. Test everything. Eventually (3 or 4 months in) you’ll have accurate CPL and CPA data for every marketing source.
That’s the goal. Get an accurate CPL and CPA measure for every lead channel.
Kill the weakest. If your tradeshows have a CPA of $942 and PPC has a CPA of $287, you should stop going to tradeshows.
Making these decisions might be hard. Maybe you like going to tradeshows, or you think it is valuable to go and meet people even if the CPA doesn’t justify it.
Ignore these emotional sentiments! Make decisions based on data. Kill poor performing marketing efforts.
Remember that the most successful organizations in the world–sports franchises, companies, governments, etc. make decisions based on data. The least successful, don’t.