Construction marketing by the numbers — some simple calculations

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What should you measure with your content marketing?
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What should you measure with your construction marketing?

Your goal: Attract new and profitable clients to sustain and grow your business. Your solution: Some numbers to tell you what you need to do, and what you have achieved.

Lifetime value

How much a new (good) client is worth to you? You can expect a good client should generate repeat and referral business — and you can plan safely on at least 70 per cent of your new business will result from repeat and referral clients. So, if you know the lifetime value of your new client business, you’ll have a good idea about how much money you can reasonably spend to acquire each new client.

Cost per lead/conversion rate/cost per sale

This is the basic number equation — how much each new lead costs you; the percentage of leads that convert to initial orders, and then, the actual cost per sale. On a one-time basis, this initial sale doesn’t need to be directly profitable — because of the lifetime value (see above).

Your marketing budget — based on objectives or past results (or both)

You can figure backwards how much you can afford to spend on marketing based on your costs/conversion results above. But what if you are just getting started and don’t have all the data? You can go with some industry benchmarks and norms — a safe number for marketing/promotional activities might be three to five per cent of total sales. (Note this stuff isn’t carved in stone and will depend on your business objectives and directions. And initially, your marketing will be relatively costly and low in return, because you don’t have the data you need to set your benchmarks.)

So how do you put all of this together into a cohesive initial marketing plan?

You determine, for example, that your client lifetime value is $10,000, and each lead costs you $100, with a conversion rate of only 10 per cent.  (That is, you need to spend $500 to get a single sale.) But that will still be profitable, because 10 sales would get you $100,000 in lifetime value sales and (say at 10 per cent) a $10,000 bottom line advantage.)

You now know to get 10 sales you would need to spend $10,000 on marketing.

If your overall business volume is $500,000, based on 5 per cent budget for marketing, you would be able to justify spending $25,000. You know you have enough of a margin of error to get things started — because you may find some of the media/marketing methods you try out won’t generate the results you are seeking.

Of course, you can include organized strategies to facilitate repeat and referral business into the equation, and your highest return on investment will likely be in developing systems and programs to enhance these sales and relationships. The value of client appreciation events becomes starkly apparent when you plug-in the numbers.

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