Measuring Marketing Basics

Posted on January 26, 2009

This post examines why marketers should begin with measuring business basics to establish a baseline for future marketing activities.

What is a new customer worth?  This is an important baseline question that every business should ask, and the answer is something that every business should know.

OK, so I know this might sound like the obvious — but it’s executing the obvious that had eluded so many marketing departments. As you can probably figure out from our website, our team is highly focused on the idea that new technology and social platforms are cool — but they’re just another tool in the box. It is measuring the right things to form insights and using those insights to develop sound strategy that forms the foundation of effective marketing.

Over the next couple weeks I’m going to consider some of what I call the “foundation questions” that every organization needs to answer so that proper marketing strategies can be build and executed. These are questions that I ask every client, and if they cannot be answered, I make it point to find the answers:

(1) What is a new customer worth? (customer lifetime value)
(2) How much does it cost to acquire a new customer by purchase funnel? (customer acquisition cost)
(3) How many customers do you lose each year, and who do they tell? (customer churn)
(4) How many customers do you gain each year from referral, and who’s referring them? (customer referral)
(5) How much, how often, and when are your current customers buying from you? (customer buying cycles)

There are dozens more questions that could be asked, but I argue that these are among the essentials because they reveal insights about your customer type, value, and preferred buying channels. It also gives you an immediate list of areas for which you can measure performance, before you get into measuring sexier items like online brand reputation audits, web analytics, and conversions. In fact, knowing the answers to these basic questions will help guide your later decisions regarding which tactics to employ and the resources to be applied.

So I’m going to allow this post to simmer for a bit and then dive into each of the above.

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