Easy Math for AEC Marketing Leaders
If you know me, you have probably heard me say that I use the word “math” as a verb. As in, “I don’t math.” Except for when it comes to marketing, of course.
I know it can sometimes be challenging to demonstrate how marketing is driving growth at your AEC firm. As mentioned in Issue No. 2 (http://us9.campaign-archive.com/?u=4e09f285a144e0eb42f685e2c&id=c187a44977) , there is often a language gap between non-marketers and marketers in the AEC industry. I learned early in my career that if I wanted to earn credibility with the billable folks, I had to “speak marketing” in ways that mattered to them. Since my audience has been AEC leaders with P&L accountability within their firms throughout my career, so it’s no surprise that “math” is the best way to demonstrate marketing effectiveness.
It is important for AEC marketing leaders to establish Key Performance Indicators (KPIs) to measure how effectively the firm’s “marketing spend” is performing. Having KPIs in place are critical to show which investments are working and which are not. Without it, marketing decisions often resemble a school-yard game of tug-a-war where the loudest Principal typically wins. For some of you, what comes next may feel like I’m taking you to summer school. For others, enjoy the refresher!
Tracking What Matters Most
to Your Firm’s Owners
Marketers tend to find program or campaign-level metrics most interesting. For example, tracking Click-through-Rate, Cost-per-Action, and Cost-per-Click indicate what kind of impact your content is making and where your leads are coming from. However, if you want to bring real value to the C-suite, be sure you can answer the big picture question, “Is the juice worth the squeeze?” or in some scenarios, “Is it still worth the squeeze?”
The best way to demonstrate this objectively is through revenue metrics. These metrics can demonstrate how much revenue and profit your marketing activities bring:
01. Marketing Return on Investment (ROI): (Sales Growth – Marketing Cost) / Marketing Cost = Marketing ROI Marketing ROI compares the amount of money you spend on marketing and the amount marketing generates. Another way marketers measure ROI is the revenue to marketing cost ratio, which represents how much money is generated for every dollar spent on marketing.
02. Client Acquisition Cost (CAC): Marketing Cost / Number of New Customers = CAC Let’s be honest, not all clients are created equal, right? Personalities and soft skills aside, all clients have a cost associated with acquiring them. Some clients are more expensive to acquire than others. Long sales cycles, presentation expenses, and time away from current projects are all factors that add to the cost of client acquisition. Growth-minded AEC firms understand that their resources (time and money) are precious, especially when operational costs are rising, and labor is scarce. CAC gives you an idea of how expensive a single customer is to acquire. To calculate CAC, you need to divide your total marketing expenses by the number of newly generated customers over a specified time. The lower the number is, the better. A high CAC could be a red flag that your marketing efforts are ineffective or that your sales team is performing poorly.
03. Customer Lifetime Value (CLV): The Annual Profit from the Customer x Number of Years – CAC = CLV. We all know it’s more expensive to acquire a new customer than to keep one you already have. CLV evaluates how much profit each customer brings to your business. Therefore, prioritizing marketing resources to focus on high-profit clients makes sense. Understanding a client’s CLV is vital because it helps you decide how much you can afford to spend to acquire them. It also lets you determine which clients are significantly more profitable so you can focus your resources on them. Lastly, having a solid understanding of your Clients’ CLV allows marketing departments to support seller-doers and business developers in finding more customers like them.
04. Traffic-to-Lead Ratio: Number of Website Visits / Number of Leads = Traffic-to-Lead Ratio I’m old enough to remember pitching the merits of having a website to my boss in the mid-1990s. It’s remarkable how sophisticated the AEC industry has become in digital marketing. If you are going to take the time to have a website, why not use it to inform your sales and marketing strategy? Why have a website if you don’t know who is visiting, how long they stay, and whether your website content is helping or hurting you? The percentage of website visitors turning into actual leads is the Traffic-to-Lead Ratio.
If you are getting a lot of traffic to your website, but visitors are not converting into leads, there could be a misalignment between what your visitor clicked on and what they found when they arrived on your site. Either your content didn’t answer their question, or maybe there was no Call-to-Action (CTA) to engage the visitor, and they left. Tracking your Traffic-to-Lead Ratio regularly will help you understand which types of pages and content engage and convert your audiences and which content needs to be worked on. There is no sense in taking up valuable digital real estate on your website housing content that people do not want to read. Instead, more relevant content that helps move your audiences from the early awareness stages of your brand to the consideration and decision phases of their buyer’s journey could occupy this space.
05. Lead-to-Close Conversion Ratio (CVR): No. of Sales / Number of Leads = Lead-to-Close Conversion Ratio Lead-to-Close Conversion Ratio (CVR) is the percentage of leads that become your customers. If leads do not buy from you at the end of the day, what’s the point? CVR will provide valuable insights into which marketing investments convert leads into customers and which do not. With this information at hand, you can make changes and prioritize your efforts. For example, will it impact your pipeline if you don’t go to the annual industry tradeshow where there are more vendors than building owners? Always ask yourself, is there a better and more affordable way to reach those buyers? Could you convert just as many leads hosting a webinar and then putting that tradeshow registration and travel money you would have spent in targeted digital advertising to drive webinar registrations? A client recently tried this and was able to garner over 200 registrations from potential clients to attend a
technical webinar and had a captive audience all to themselves. Before this, our client generated most of their leads at tradeshows and industry events. Comparing the two methods for lead generation, the webinar route produced far better CVR at a much lower cost.
06. Marketing Originated Customers Percentage (MOCP): Marketing Leads / Total New Customers = Marketing Originated Customers Percentage Building internal credibility is something all AEC marketers experience when building their careers. Ideally, AEC marketers could point to all their firm’s clients, and claim marketing efforts generated them. But unfortunately, it is not always the case. MOCP shows the percentage of customers generated through marketing efforts over a specific period. You can easily calculate it if you track lead sources. Obviously, the higher the percentage, the better. This metric clearly shows how much business grew thanks to marketing.
07. Marketing Influenced Clients (MIC): Clients that Interacted with Marketing / Total New Customers = Marketing Influenced Customers When leads are not generated by marketing, there are ways for marketing to nurture leads into ready-to-buy customers through thoughtful and engaging content. This metric proves the importance of content, email campaigns, and other initiatives that help customers move through the funnel and to the purchase.
Having a measurable outcome allows you to prove the importance of various marketing initiatives. Regardless of your marketing team’s size, the bottom line is the bottom line. Revenue metrics can help your firm’s stakeholders understand whether your marketing juice is worth the squeeze.
It’s an exciting time to be a marketer in the AEC industry. For all my fellow marketing professionals, keep moving the needle. Our industry needs you now more than ever.
Until next time, stay calm and measure on!
Issue No. 5 in the books! (Woot Woot!)
