Cost-Per-Sale, not Cost-Per-Lead
How to effectively measure home improvement advertising
Measuring your home improvement advertising campaigns is one of the single most important things you can do to keep your costs in line. You may spend 6%-14% of your total gross sales on advertising and marketing. Not measuring advertising can create cost overruns, over-priced advertising (Yes, you can ask them for a better deal), wrong advertising choices and an overall loss of profits. You may have a general idea of what the cost-per-lead is, but what about after the lead is run and if the lead created a sale?
Cash Register Metrics
The term “Cash Register Metrics” was coined (no pun intended) by Dave Paulovich, President dDaniel Advertising. That means that all advertising should be measured all the way down to the cash register. This can be accomplished by using a cost-per-sale evaluation (CPS). Measuring CPS allows you to see what media performed the best and what you need to trim. This has proven to be the best method to measure home improvement advertising.
*Hint: Once you know what advertising you need to trim, you can use the CPS as leverage to negotiate a price that turns a profit. If they say no to your requested price, no problem, there are 14 other ways to advertise.
ADVERTISING COST / # SOLD = COST-PER-SALE (CPS)
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Measuring Appointment Setting, Keeping and Closing Ratio
You will also need to measure the appointments set, appointments kept and closing ratio. Some advertising products have better appointment percentages than others. Utilizing surveys, CRM systems, call tracking, and phone call analytics can establish these percentages. Most of the time you will need to listen to each phone call to determine which leads turned into appointments.
*Note: A recent survey and CPS evaluation showed that up to 23% of appointments were not kept after they were set.
Certain products have a higher closing than others, if you are sending your sales team out after leads that are less quality and not ready to buy, this can lead to a frustrated sales force and fewer sales. Digital media is notorious for generating fewer quality leads. A recent dDaniel evaluation showed that less than 26% of leads generated by digital advertising lead to an appointment and less than 30% of those appointments lead to a sale.
Referrals and Organic*
Don’t forget to account for referrals and organic search leads that your (non-digital) advertising may be generating. Many people will research your company on Google before they call. Determining what organic activity your advertising generated can be tricky, but you can take your total organic leads and divide them by total leads generated and determine a percentage. This percentage can then be applied to each advertising product as a pro-rated average. Referral rates can fluctuate based on your market and service, but referral rates can be anywhere between 30%-50%.
Pro-Rated Organic Formula:
ORGANIC SEARCH LEADS* (3,412) / TOTAL LEADS (6439) = 53%
Once you have these performance metrics in place you can create a master CPS sheet that shows all of your advertising products and what the CPS is for each media. Now it is time to negotiate a better deal.
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*Organic Search Leads or traffic– Organic traffic is the opposite of paid traffic, which defines the visits generated by paid ads. Visitors who are considered organic find your website after using a search engine like Google or Bing, so they are not “referred” to any other website.