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Evaluate your marketing decisions using financial tools

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Are you making good marketing decisions?

Are you making good marketing decisions? Conducting financial analysis can help you to make better, more informed marketing decisions. It can help you improve the performance of your marketing by selecting the best marketing activities for your business. By improving the efficiency of your marketing resources you can free up capital for other purposes.

What ways can you use finance to evaluate your marketing decisions?

Some of the ways you can use finance to evaluate your marketing decisions include:

  1. To select the best marketing activities for your business by assessing the potential return on investment and the level of risk of success or failure.
  2. To determine which part of your marketing mix should be improved to increase your sales, by assessing the importance and utility of your marketing mix to your customers.
  3. To assess which attributes of your brand should be strengthen to increase your market share by assessing the importance and utility of each brand attribute to your customers.

Three financial tools to measure your marketing

Here are three tools to evaluate your marketing decisions include:

  1. ROI: Assessing the return on your marketing investment. This is the annual cashflow generated from your marketing activity expressed as a percentage of your total investment.
  2. Payback period: Determining the payback period (the time needed to payback the initial investment in years).
  3. Customer life time value. This is the average total revenue generated by each customer over the period of years they continue to buy from you.

Please email us here or call 07 3821 3939 if you would like to receive a copy of the formulas to calculate these measurements.

Our top 5 tips on marketing decisions

  1. Measure what is important. Identify the success factors for your business (eg. client satisfaction, employee engagement, lifetime value of your customers) and make sure you have a process to measure and evaluate it.
  2. Identify the level of risk and return for each marketing activity. For marketing activities that have a higher risk of not achieving your goals, you should set a higher minimum return (investment hurdle). It also allows you to compare and select a marketing activity that gives you the best risk/return relationship.
  3. Diversify your target market portfolio. If you’re an established medium-to-large business, you should aim to diversify your revenue across seven target markets - the ideal number to optimise your revenue stream. If you are a new or growing business, you should focus on 1-3 segments. Build a solid brand in these target markets, progressively adding one new target market at a time, and ensuring your foundations are stable before moving upward.
  4. Consider your level of innovation and your product’s life cycle. If you are operating in an innovative industry, you will need to invest more heavily in marketing in the early days, before your competitors saturate the market. Companies in established industries can adopt a more gradual approach. With product cycles being much shorter, you also need to assess the potential lifetime revenue of your products when setting your annual marketing budget.

Call us on 07 3821 3939 to book a meeting to discuss how the performance of your marketing can be improved.