In the 1989 movie, Field of Dreams, Kevin Costner’s character said, “If I build it, they will come,” in reference to building a baseball diamond in the middle of a cornfield.
So what’s this movie have to do with business?
I had a conversation with a relative of mine many years ago. He was part of a core team of seven very bright engineers who had all left their high-paying jobs to get together to start an engineering/software firm that specialized in long-distance fiber communication.
Apparently, their software was revolutionary. It doesn’t much matter that I barely understood what the business did or, frankly, how they were going to make money.
What remains with me, all these years later, is his answer to my question: “Who is going to sell your product?”
He seemed dumbfounded at my question. His response left me dumbfounded.
He essentially said that their software was so awesome and revolutionary that the firm didn’t need salespeople. The world would beat a path to their doorstep.
He Built It, They Didn’t Come
It didn’t take long for the team of engineers to run out of money and, ultimately, close shop.
That was a year of his life that he’ll never get back, and an expensive life lesson.
I’ve often said in many of my blog posts that you need to understand marketing. How are you going to market your product? Who is going to buy your product?
And here’s the number one question that eludes most entrepreneurs.
Let’s forget the notion that you need to have a marketing strategy for a minute, and let’s focus on lead acquisition cost.
Running a marketing campaign without understanding your lead acquisition cost is like throwing a handful of spaghetti at a wall and watching what sticks.
Let’s forget the notion that you need to have a marketing strategy for a minute, what’s your lead acquisition cost?
The Five Questions
If you run a Google PPC campaign, you need to know the answers to these five important questions:
– How much did you spend on the campaign?
– How many leads did the campaign bring in?
– How many of those leads ultimately ended in a sale?
– What is the average cost of a sale?
– What is the average gross margin?
Ultimately, you need to understand that for every $1 spent on Campaign A, you brought in $X with a gross margin contribution of $Y.
If $Y is greater than $1, keep going. If $Y is less than $1, then change course.
Once you understand this very important marketing formula, and you have a mechanism to track this information accurately and consistently, then you can replicate the campaigns across multiple ad sources and campaign types.
Turn the crank, and watch the sales roll in.
With regards to Google PPC, if you can understand the above, then you can run multiple campaigns. For example, you can run a $1,000 monthly campaign for red widgets, a $500 monthly campaign for blue widgets, and a $300 monthly campaign for green widgets.
You can also advertise on Bing.
You can do email marketing.
Showcase your widgets at a tradeshow.
Hire a telemarketer.
Start a blog.
Write a book.
And so on.
The point is, you need to understand which campaigns and lead sources are working and which are not.
Next, you need to have a marketing package where you store and manage this information.
I hear Hubspot is an awesome product, and although I’ve never personally used it, I know quite a few business owners who do.
I also know quite a few business owners who implement Hubspot, think that their problem is solved, and move on to the next business problem.
Reality check … just because you have a hammer, everything starts to look like a nail.
It’s not the tool, it’s what you do with it that counts! Literally.
Look at the screenshot.
Imagine if you had data like that for every ad campaign and every product.
The data is written back into your CRM and tracked throughout the customer’s life history with your business.
What I explained before is that you need to understand your gross margin on a particular product, but my explanation presumes that the customer bought one widget, for example.
Let’s say the customer buys another widget in a few months. And then orders an upgraded widget from you next year.
The customer might have spent $100 with you on the first sale but, subsequently, spends thousands more in the future.
You can’t keep proper track of this data in Excel, and frankly, if you’re not monitoring these spends to within fractions of a percentage, then you’re wasting your marketing dollars.
If you don’t know your numbers, then stop marketing. If you do, then you’re on your way to growth, and you can say good riddance to the axiom, “If I build it, they will come.”
If you liked this post, you might also like this related post on marketing: What’s the Number 1 Most Important Thing You Need to Understand In Order to Scale Your Marketing Returns?
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