The primary aim of any business is to make money through continual growth and expansion. But with around 25 per cent of any existing client base lost to competitors every year, how do you ensure the continued growth of your business? The simple answer to this question is, of course, to market your business through one (or more) of a whole host of available options, which include print advertising, direct mail and sourcing internet leads from a third party supplier. Of course every marketing source will claim to be the best thing to happen to your business, but how can you be sure this is the case? By asking the following five questions, you can determine how best to market your business before spending a single penny:
- How much do I want to grow my business by?
- How many sales will it take to achieve these earnings?
- How many leads will I need to achieve these sales; and how many leads is each marketing initiative likely to produce?
- How long will it take to receive this volume of leads?
- How much will it cost?
The first two questions should be asked prior to conducting any research into any potential marketing methods. Question one: ‘How much do I want to grow my business by?’ will focus your attention on the task at hand; giving you an end result to aim for. This end result, or revenue figure, provides a benchmark against which you can compare each potential marketing budget ‘candidate’. Question two: ‘How many sales will it take to achieve these earnings?’ will assist with this benchmark, further focusing on what you need to do to achieve your revenue target.
For the purposes of this example, I will assume that the gross earnings required are £135,000, with average earnings per case set at £750. This will, therefore, require 180 sales per year, or 15 sales generating a total of £11,250, per month.
So how many contacts will you need to achieve 180 sales? Clearly, it is not as simple as needing 180 phone numbers because the very nature of a lead is that business is not guaranteed. Instead, it is the very start of a process in which you will be required to go through a number of additional processes to stand even the smallest chance of achieving a sale. While each marketing method is likely to produce both convertible and non-convertible leads, each will be unique in terms of the volume supplied, so it is vital that you ask question three: ‘How many leads will I need to achieve these sales; and how many leads is each marketing initiative likely to produce?’ when considering any new business acquisition method.
Attracting business
I would like to apply this process firstly to ‘main display’ print advertising. My local paper (The Chester Chronicle) has a readership of around 35,000 people, which, from a single advert, would provide 70 responses (based on the response rate of 0.2 per cent suggested by industry sources). However, only 10 per cent of these respondents will actually want to write business, giving us a mere seven sales.
So what could be achieved through a direct mail campaign? Royal Mail advertises that 2 per cent of households will respond to any direct mailing that they receive, so the question really has to be how many households will you target with your marketing campaign? If you target 2,000 households, you could expect to receive 40 responses, resulting in 10 sales.
With internet leads however, you are up to three times more likely than these other, more traditional forms of marketing when an established and reputable supplier is used. Paaleads.com has an independently verified conversion rate of two to three leads in 10, which in the context of both print advertising and direct mail means you could expect to achieve business from 21 clients when 70 leads are received, or 12 sales from 40 leads.
So what light can question four: ‘How long will it take to receive this volume of leads?’ shed on each of these marketing methods?
Both print advertising and direct mail allow you to target a high volume of people at once but at the detriment of the control you have over how quickly leads will be received. You may receive all responses on day one, but on the other hand they could come through over a much longer time frame. This lack of certainty poses three additional questions:
- Do you have the back office and administration facilities needed to deal with 70 enquiries (bearing in mind that they could, feasibly, all come at once), and;
- Can you really afford to run around searching for the best mortgage deal for 70 enquirers knowing that you are likely to convert just seven of them.
- Finally, how can you quickly and easily identify the 63 enquirers that are not likely to progress to the point-of-sale?
Comparing the cost
The final question that we need to apply to each of our marketing methods is ‘What is the cost?’ This is perhaps the easiest of the five to answer, with figures being fixed by the provider. The cost of a print advert will, of course, be dependent on your location and how targeted the advert is (for example, if the advert was printed on a right-hand page within the finance or property section, it would be more costly than if it were printed on page six). My local paper charges a fee of £850 per month. However, you must also budget for the design and compliance of your ad, which, for the purposes of this exercise, will add an additional token fee of £100 per advertising campaign. Seven sales from each campaign would produce earnings of £5,250, so you would need to run 26 of them to get to your target figure. This equates to 1820 ‘leads’ at a total cost of £24,700.
Looking at direct mail, you could expect £7,500 in revenue from each campaign. Initial outlay on each would run at £3,000 and you would need 18 campaigns to generate the 720 enquiries needed to achieve the revenue target. The total cost of this would therefore be £54,000.
So what of internet-generated leads? If you were to commit to a monthly allocation of 60 leads with paaleads.com, you should expect to spend £1,950 per month. This would enable you to reach the earnings target of £135,000 with an outlay of £23,400, based on a one-in-four conversion rate. If you reached the three in 10 conversion rate stated by existing members of paaleads.com, this cost reduces to £19,500 or £1,625 per month.
To summarise, asking these five simple questions has shown us that while print advertising will give you access to a high volume of ‘clients’, it is a high-risk form of marketing as you are reliant on how your advert is received by the general public. In truth, you need to have access to massive volumes of people to really achieve anything by marketing in this manner. The same is true of direct mail. However, internet-generated leads put you in control, asking you to determine the volume, type and frequency of the leads supplied. In addition, as costs are lower and conversions up to three times more likely, it is evident that internet-generated leads are the most cost-effective way of achieving a controllable volume of leads.
My final thought to you is this: regardless of which method you choose, it is clear that marketing your business is hard work and every day counts. Remember the old adage – ‘if you’re not making money, you’re losing it’ – so if you haven’t asked these five questions of your current marketing strategy, I would do it. And soon.
Vanessa Blount is head of PaaLeads.com
