No organization has unlimited marketing resources. All of us have to make decisions about the most cost-effective ways to attract new customers. Gap year programs are no exception.
The good news is, there’s a science to understanding and predicting marketing channel effectiveness. Here’s a quick primer in how it works:
Track marketing performance.
It’s an old adage, and it may go without saying, but “if you don’t measure it, you can’t manage it.” Getting on top of marketing effectiveness means taking a moment every day to make note of how well you're doing. Every day, you should record at least these two things:
- The number of new inquiries you received
- The number of earlier inquiries that enrolled in your program
Do it for your company overall, and for each marketing channel. Every new inquiry comes from somewhere – a referral by a past participant, an email campaign, a visitor at a fair. Keep track of that.
Know your average conversion rate.
After you’ve compiled performance data for a month or so, it’s time to answer the key question in marketing assessment: how many inquiries did it take before you got one new program participant? The inverse of that number is called your average conversion rate.
Average conversion rate starts from the basis of an inquiry, and tells you how many participants you should expect to derive from any one of them. This number, calculated company wide, is your baseline metric. It's how you assess your marketing effort overall and the relative effectiveness of the individual channels you use. By determining a set of conversion rates, one for each of your individual marketing channels, you'll see immediately which of them is driving your business forward, and which is holding you back.
SAMPLE MATH: At the five USA Gap Year Fairs you attended in several cities, you received 240 inquiries. Of those, 24 enrolled in your programs. Your conversion rate for USA Gap Year Fairs is 10% (24 enrolled ÷ 240 inquiries).
Understand your marketing investment.
Your total investment in marketing and promotion is greater than you might think. In addition to the variable costs that are clearly associated with each of your channels (event costs, travel, advertising costs, postage, online directory participation, etc.), there are ongoing fixed costs involved in your marketing effort as well (payroll, technology, contract staff, and other overhead). Fixed costs are ongoing expenses you pay every month to keep the ship running — costs that aren’t associated with any one marketing channel.
Still, it is essential that you maintain your ability to execute marketing programs. To understand how much each program has truly cost you, you need to allocate a portion of your fixed costs back to each channel you’ve used.
By determining the percentage of your enrolled participants from each channel, you will know where to allocate your fixed marketing expenses among them. The record keeping described above should make this easy. Combining each channel’s variable and fixed costs will tell you exactly how much money you’ve been spending on your respective marketing activities.
Know your cost-per-inquiry and cost-per-acquisition.
Knowing your conversion rate for each marketing channel allows you to assess relative performance—but it’s only part of the picture. You must keep in mind that although a channel has a high conversion rate, it may still be too expensive to justify. Or maybe something you’ve been doing on the cheap with negligible costs is worth continuing despite a low conversion rate.
To make these assessments, you need to determine your cost-per-inquiry (CPI) and cost-per-acquisition (CPA) for each channel. The math is simple, if you’ve been keeping good records:
- Cost-per inquiry (CPI) = Inquiries received ÷ (variable costs + allocated fixed costs)
- Cost-per acquisition (CPA) = Program participants acquired ÷ (variable costs + allocated fixed costs)
Doing this creates a fair standard for comparing channels against one another. If you define “marketing success” as getting someone to enroll in your program, you now know exactly how much you have to spend to achieve success in each channel. It’s a powerful bit of knowledge.
Set benchmarks for marketing performance and return.
It’s important that you know what these three key metrics (conversion rate, cost-per-inquiry, cost-per-acquisition) are for your business overall. Those are your benchmarks for program assessment. It’s not a hard-and-fast rule, but it’s generally good practice to emphasize the programs that are outperforming your benchmarks, and to minimize the programs that are underperforming your benchmarks.
Use data to make good marketing decisions.
One last, simple metric is necessary for assessing potential new marketing opportunities against what you’re already doing.
You should be able to project a CPI and a CPA for each new marketing channel you’re considering: how much is the new program going to cost, and how many inquiries and participants can you reasonably expect to derive from it? However, it’s not a fair comparison to weigh these projections against your defined benchmarks, because unlike your benchmarks, the projections don’t account for fixed costs.
The solution is simple: Define secondary CPI and CPA benchmarks using variable costs only. These two new benchmarks allow you to do a side-by-side assessment of every new marketing opportunity that comes up. Cash flow willing, you should seriously consider any new marketing opportunity that promises a CPI and a CPA that’s lower than your variable-costs-only benchmark.
The information above is a simple overview of an otherwise complex marketing science. If you have questions about how any of these points apply to your program’s unique situation, we’d welcome the chance to help you out. Feel free to email me at email@example.com.
Good luck with your new push into the science of marketing!