Measuring the effectiveness of your marketing expenditures, can lead to increased profitability. Businesses reach out to current and potential customers in various ways, Ads, email campaigns, special events, etc. It is important when a new customer first shows an interest in you business, to ask the simple question, "How did you hear about us?" If you keep a tally of the answers, you can measure the effectiveness of each medium you use to get your story out. Armed with this information, you can calculate the "Cost of Customer Acquisition (CCA)." To calculate the CCA, you simply divide the cost of each marketing campaign by the number of customers that campaign attracted to your business. The results may surprise you and cause you to change the nature of your marketing.
For instance, when I was on the Executive Committee of a SCORE Chapter, I suggested that we analyze the data we had collected on the answer to this question over that last three years. We found out that most people learned about our chapter and its activities via "word of mouth" or our website. Almost no one learned about our chapter through our print ads. We dropped the print ads and saved $2,000 a year or almost 10% of our total budget.
Dr. Horan, Author
Career Wall Street Professional, 40+ years of experience in analyzing and forecasting income and cash flow statements and balance sheets for businesses in variety of industries. Strong skills in business planning, forecasting and risk assessment as well as mentoring. Strong modeling and database management skills in, Excel, Access, MS Office and QuickBooks used for 20 years.