Many marketers focus on growth, such as increasing their website traffic, social media following, boosting sales, brand mentions and so on. All of these are important, but they need to be looked at in the context of how they affect your business’s bottom line, after all there is no point having a million followers on social media if you aren’t able to pay your bills.
The best way to increase your bottom line is actually pretty simple – control costs. There are a number of areas to look at:
- Gross profits – Total sales minus the cost of goods sold. To arrive at this number, deduct the costs associated with making and selling the item, or the costs associated with providing your services to your customers.
- Net profits – The profit remaining after you also deduct operating expenses for your business, and all other charges including taxes, interest, and so on.
- Return on investment (ROI)
- Return on advertising spending (ROAS)
- Cost per customer acquisition
Know Your Numbers
Once you have optimized each marketing campaign to get the best ROI and keep your cost per customer acquisition low, you won’t need to spend as much, but will get better results. And instead of chasing after more and more traffic, you will make the most of what you have by boosting conversion rates and thus ROI.
Your first step is to look at your current sales. How much did you make last month?
Next, look at your traffic logs. Where did these sales come from?
- Your sales landing page
- Email marketing
- Social media (both paid and free)
- Ads, such as pay per click
Use your Google Analytics account to track where the sales came from and how much, if anything, you paid to get that traffic and those sales.
Don’t forget the time factor as well. You can’t start earning $500 an hour doing tasks that are valued at $5 an hour. But if you factor in the cost of hiring a freelancer to help you, that will decrease your profits. Knowing your operating costs and keeping them under control is also key to boosting your bottom line.
Focus on Conversions, Not Traffic
Many businesses fail to consider customer acquisition costs. They are willing to spend $100 to get a customer to buy a $50 product. The belief is that the customer will be worth more over the long term and they will somehow be able to make up the $50 loss. However, the Pareto principle states that 80% of your sales come from 20% of your customers, so it is not really likely that you will ever catch up.
Conversion is important, but you need to look at it in terms of actual cost. Most marketers set goals like, “increase our website traffic by 10% in the next 3 months,” but it might be better to think of goals like, “Reduce cost per acquisition by 10% in the next 3 months.”
Here are a few ways to do this:
Focus on your best customers
Look at your main traffic source. Do they subscribe/and or buy from you? If not, spend less time marketing there. Spend more time at the locations where your paying customers are coming from.
Focus on quality traffic, not quantity of traffic
Again, check to see where the traffic is coming from, and how well it converts.
Set a clear goal for every campaign
Don’t just think about “more traffic” and “some profits”. Be specific, so you can then measure your results to make sure you are on track.
Split test to boost conversions
Create two versions of the same marketing piece. See which gets the best response. Then make the best one the “control” and try to beat it. The higher it converts, the less you will have to spend on finding traffic and running ads.
Know the cost of everything
You can’t calculate ROI if you have no idea how much time and/or money you are spending.
Follow these tips to make your business thrive.