The marketing gap, very simply, is the difference between where you currently are and where you are trying to get to. This void is what you want your marketing activity to generate. If you don’t know what this marketing gap is – how can you expect anyone to fill it?
In order, for any marketer, whether in-house or outsourced, to create the right strategy with the right level of supporting investment which generates a positive return, it needs to understand what these figures are. It is always surprising how many SME business owners throw money at marketing without having specific targets in place. However, without clear targets how can you….
- set a realistic marketing budget that will generate a positive ROI?
- know how many enquiries you need your marketing budget to generate?
- know what your conversion rate needs to be?
- track and measure performance?
However, it is not quite as straight forward as you may think. It is not quite as simple as subtracting A from B and leaving you with target C. Firstly, you need to understand the following metrics within your business. If you are reading this and thinking that there is no way you would know these figures, then introduce a system asap to start tracking them.
- Average transaction value (total value of sales/ no of transactions)
- Average customer purchasing frequency (no of transactions / no of clients)
- Average annual customer value
- Average length of customer relationship
- Average transaction margin
- Customer churn rate (or retention rate)
- Conversion rate (enquiry to quote and quote to order)
Unless you are working in an industry where 100% of clients are new, then you will always have a base of repeat custom upon which to build. In an ideal world, that foundation of business should be strengthened year-on-year. However, it is not uncommon that this could also be a falling figure if you are trading in a declining market or have been affected by a year of poor performance or falling customer service levels.
So, once you know what the marketing gap is in terms of sales, you can calculate how many transactions, customers and, ultimately, enquiries would need to be delivered at the top of the funnel to reach your targets at the other end.
The true gap analysis is between how many enquiries you are currently generating on a weekly basis, compared to how many you need to be delivering to reach your growth targets, assuming all other parameters stay the same. In reality, there are tweaks in performance you can make at different stages to minimise that gap. For example, if your conversion rate was 5% better, or your average client value was 3% higher or margins were improved by 2% then it could make a dramatic impact on the volume of enquiries required. In some cases, you may not even need any more enquiries at the top of funnel to achieve the desired growth.
The bottom line is, until you know what you need your marketing to achieve and what a realistic budget to get your there looks like (with a healthy return-on-investment), then you can’t really even begin to start planning out which specific activity is going to best for the business.
It also gives you the information you need to evaluate any future marketing investment opportunities rationally based upon fact, rather than based on emotion or gut instinct. This a fundamental reason why Opportunity Marketing was set up in the first place, so that business owners could ensure that their marketing budget was wisely spent and got them a guaranteed return on investment.
For more ideas on how to marketing your business visit our blog on Small Business Marketing Ideas.
Latest posts by Ian Kirk (see all)
- Being a PEST: from convenience to conscience marketing - June 26, 2019
- Why are robust processes critical to marketing success? - June 14, 2019
- Why ROI is key to Marketing Strategy (and how to influence it) - May 15, 2019