Social Media Marketing All-in-One For Dummies. Michelle Krasniak. Читать онлайн. Newlib. NEWLIB.NET

Автор: Michelle Krasniak
Издательство: John Wiley & Sons Limited
Серия:
Жанр произведения: Маркетинг, PR, реклама
Год издания: 0
isbn: 9781119696933
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Although often thought of as the province of B2B companies offering high-ticket items with a long sales cycle, lead-tracking tools can help you segment existing and prospective customers, improve the percentage of leads that turn into clients, and build brand loyalty.

      Your bookkeeper or accountant can help you compute and track other business measurements to ensure that your business turns a profit. You may want to pay particular attention to estimating your break-even point and your profit margin.

      Break-even point

      Computing the break-even point (the number of sales needed for revenues received to equal total costs) helps determine when a product or product line will become profitable. After a product reaches break-even, sales start to contribute to profits.

      To calculate the break-even point, first you need to figure out the cost of goods (for example, your wholesale price or cost of manufacturing) or average variable costs (costs such as materials, shipping, or commission that vary with the number of units sold) and your fixed costs (charges such as rent or insurance that are the same each month regardless of how much business you do). Then plug the amounts into these two formulas:

       revenues – cost of goods (variable) = gross margin

       fixed costs ÷ gross margin = break-even point (in unit sales)

Graph depicts the break-even chart plots fixed plus variable costs; each sale after the break-even point contributes to profits.

      FIGURE 2-5: The break-even chart plots fixed plus variable costs; each sale after the break-even point contributes to profits.

      Profit margin

      Net profit margin is defined as earnings (profits) divided by revenues. If you have $10,000 in revenues and $1,500 in profits, your profit margin is 15 percent (1500 ÷ 10000 = 0.15).

      Revenue versus profit

      One of the most common errors in marketing is to stop analyzing results when you count the cash in the drawer. You can easily be seduced by growing revenues, but profit is what matters. Profit determines your return on investment, replenishes your resources for growth, and rewards you for taking risks.

      Return on investment (ROI) is a commonly used business metric that evaluates the profitability of an investment or effort compared with its original cost. This versatile metric is usually presented as a ratio or percentage (multiply the following equation by 100). The formula itself is deceptively simple:

      ROI = (gain from investment – cost of investment) ÷ cost of investment

      The devil is, as usual, in the details. The cost of an investment means more than cold, hard cash. Depending on the type of effort for which you’re computing ROI for an accurate picture, you may need to include the cost of labor (including your own!), subcontractors, fees, and advertising. When calculating ROI for your entire business, be sure to include overhead, cost of goods, and cost of sales.

      You can affect ROI positively by either increasing the return (revenues) or reducing costs. That’s business in a nutshell.

      

Because the formula is flexible, be sure that you know what other people mean when they talk about ROI.

      You can calculate ROI for a particular marketing campaign or product, or an entire year’s worth of marketing expenses. Or compare ROI among various forms of marketing, comparing the net revenue returned from an investment in social media to returns from SEO or paid advertising.

Run ROI calculations monthly, quarterly, or yearly, depending on the parameter you’re trying to measure.

Snapshot depicts play around with variables, such as the value of a sale, and performance criteria.

      Courtesy of ClickZ.com

      FIGURE 2-6: Play around with variables, such as the value of a sale, and performance criteria.

      ROI may be expressed as a rate of return (how long it takes to earn back an investment). An annual ROI of 25 percent means that it takes four years to recover what you put in. Obviously, if an investment takes too long to earn out, your product — or your business — is at risk of failing in the meantime.

      

If your analysis predicts a negative ROI, or even a very low rate of return over an extended period, stop and think! Unless you have a specific tactical plan (such as using a product as a loss leader to draw traffic), look for an alternative effort with a better likelihood of success.

      Technically, ROI is a business metric, involving the achievement of business goals, such as more clicks from social media that become sales, higher average value per sale, more repeat sales from existing customers, or reduced cost of customer acquisition.

       The amount of traffic to website or social media pages

       The number of online conversations that include a positive mention of your company

       References to your company versus references to your competitors

       The number of people who join your social networks or bookmark your sites

       The number of people who post to your blog, comment on your Facebook page, or retweet your comments