Recap of my marketing action & impact

I am just looking at very simple cost and return estimates for a few things that all came together in the end of August for us. We had three activities that all cost money and are having various imacts on sales and market perceptions for us.

$425.42 . . . . Printed glossy full color menus
$220.13 . . . . Printed 5000 full color glossy postcards with offers
$282.96 . . . . postage bulk mailed 2100 pcs
$198.73 . . . . School Nights Promotion


$1,127.24 . . . TOTAL EXPENSES

$1,043.47 . . . Total 5-day increase over previous 6-week average

I have nearly paid for all of the promotions to date in just 5 sales days. I took the 6-week average of each sales day and compared to actual sales the last 5 sales days (Sat to Fri). We are $1,043.47 ahead of our previous 6-week average! That includes having to close for a Friday night due to water cut-off . . . and I expect to have impact for another 2 weeks.

Based on the success of these activities, we are bulk mailing two more batches to 2 additional routes the next two weeks. Trying to score still more new customers to pump up the success rate and stability to sustain this growth and not deflate back down too far.

September plans:

  • news release about donating $$$ to school from school nights promotion
  • donating food to Habitat for Humanity build in our town.
  • direct mail postcards to 2 new postal routes in neighboring towns
  • hosting rest stop for Bike Ride Across Georgia . . plus “Brunch with Bikers”
  • Another School Nights with a different or same elementary school
  • Place postcards in Visitors/Welcome Center and Chamber of Commerce

I forgot to mention we had a local friend and fellow food purveyor scheduled to play his hammer dulcimer (all public domain material) in our dining room last night. He actually brought groupies with him :lol: We had a good night with no cost to us except a pizza for him and his wife. Everyone had a great time . . . he played a couple of sets.

So, our tally for expenses and returns to date:

Return on Investment 67.5%

Nick:

First let me say that what you have done is OUTSTANDING. Your new marketing campaign has increased sales, generated new customers and increased your exposure to your target market. Advertising / Marketing campaigns are very difficult to justify on a pure financial ROI. Adding in all the other intangibles, are what really justifies advertising.

Let’s discuss how the term Return on Investment (ROI) could be used with your numbers.

You have invested $1,127.24 in actual cash outlay.

You have increased sales by $1,043.47.

From these increased sales, you have a profit margin. The profit margin is the amount that you should use to calculate the ROI for this marketing campaign. I don’t know what you profit margin is – but let’s assume that it is 50% on all sales over base expenses. Your business will have several profit margins – I am assuming that you were making a profit before you launched this marketing campaign.

So this marketing campaign increased your sales by $1,043 – multiplied by a 50% profit margin yields $521 in profit.

From Wikipedia: “In finance, rate of return (ROR) or return on investment (ROI), or sometimes just return, is the ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. The money invested may be referred to as the asset, capital, principal, or the cost basis of the investment."

So your actual ROI on this investment is negative.

From a purely financial standpoint, you invested $1,127 and received $521 back. ROI is then calculated as:

(521 - 1127) / 1127 = -53%

From a business standpoint, if you calculate a value on new customers, increased exposure and other non-financials, then an actual ROI for this advertising campaign can be calculated.

Thanks for allowing me to throw in my financial $.02 worth.

Thanks,

Fred

Hi Fred

I don’t think your calculation is strictly speaking true in Nicks case as he is looking at additional sales revenue i.e. unless Nick scheduled extra staff for the week the only additional expense in generating the additional revenue is the marketing material and the food cost (I guess this is how Nick got his 67.5%)?

So its cost of marketing materials divided by (increase in revenue minus cost associated with increase in revenue). Fixed expenses shouldn’t really be taken into account as the shop was already open.

Now overall profitability of the shop before and after the marketing - well thats a whole different arguement.

Well done Nick just keep it going I’ve fallen for the old ‘great sales lets back off a bit’ and a few weeks later suffered from a drop.

And my best piece of advice? - plan ‘x’ number of menu changes a year (say 4) this allows you the excuse for something new, a real excuse (provided you have an expiry date) to change offers/prices if the need calls for it (i.e. cheese prices). Everyone likes something new - so its another 4 other opportunities for new news each year.

Wizzle[/b]

All well said. I should not have used “return on investment”. I should have used a phrase like “impact on sales” since I cannot yet really calculate the return on investment. You are right, and I do have a spreadsheet that includes COGS and any additional labor brought in for specified events.

Getting really detailed, I would take the menu printing out of the equation as well, and leave us with:

Expenses: $798.25

Sales Impact: $1,785.14

Net Return to date: $350.26

It ain’t huge money, but as you said, the value in new customers trying our shop is immeasurable at this point. We’ve seen a couple dozen new customers from our expanded service area in the last 8 sales days. That’s a lot when you average 35 to 45 customers a night.