There are five basic profit levers in marketing that have a measurable and material impact on your bottom line:
1) Number of leads
2) Cost per lead
3) Lead-to-client conversion rate
4) Margin per sale
5) Purchase frequency
And these profit levers have a multiplier effect: get 20% more leads and increase your conversion rate by 20%, and you increase your number of new clients by 44%. (The higher conversion rate now applies to a greater number of new leads.)
Improve margin per sale by 20% as well, and now you’ve increased profits from new clients by 73%… boost performance in all five areas by 20%, now you’ve improved by 249%!
So if you don’t have a 2016 marketing plan written yet, keep these five profit levers in mind. Or if you do have a plan in place, take a second look and make sure it’s focused on these five goals:
1) Get More Leads. All things being equal, getting more leads into the top of your marketing funnel automatically means more paying clients. Just be careful to avoid sacrificing the quality of your leads to get more quantity. If possible, get more leads from the same sources you’re currently generating new profitable clients.
Here are a few ways to potentially get more leads: Can you increase your Adwords budget? Can you reallocate existing ineffective advertising channels to more efficient channels?
2) Reduce Your Cost Per Lead (CPL). Run A/B tests to identify the best performing ads and landing pages. Track ROI not only for each campaign, but each identifiable segment of each campaign. You don’t have to reduce CPL right out of the gate, but if you measure the performance of everything you can, a lower CPL will naturally follow: that which is measured improves.
3) Improve Lead-to-Client Conversion Rate. Leads don’t have much value unless they turn into paying clients. Increase conversion rates by building more trust at the top of your funnel with a professional website rich with content, more testimonials, and more favorable online reviews. Clarify your value proposition to stand out and own a niche. Improve your offer to be a no-brainer for your target audience.
A better conversion rate exponentially increases the profitability of all other marketing activities and immediately adds revenue without additional costs.
4) Increase Margin per Sale. If your cost per lead is constant, and your conversion rate remains the same, profits can still rise if each sale becomes more profitable. Can you add more value for clients at a higher price? Can you strip out costly product or service features without reducing your price? Talk to clients and prospects to find out what matters most to them. Identify ways to add value in those areas so you can charge the premium prices you deserve.
Making more money with an equal or less amount of work is always a win.
5) Increase Purchase Frequency. As you know, it almost always costs less to get an existing client to buy from you again than to attract a new client. So this may be the lowest hanging fruit with the biggest impact. Focus on the best ways to engage your existing business relationships. This may mean more (or better) email marketing, social media, live events, or all of the above.
If you’d like clarity on how to achieve these five goals, sign up for a complimentary strategy session where I’ll present you with a 2016 Marketing Profits Optimization plan. This will include market research on your niche, sales projections, and budget options. Click here now to book your FREE strategy session.