Understanding your consumers decision-making processes can increase the efficiency of your marketing and advertising budget by 50 percent
Marketing and budgeting for marketing isn’t an easy task, especially if you don’t understand the decision-making processes of potential clients. However, if you use simple metrics to better adjust your marketing efforts to improve your understanding of what potential clients are thinking, youre likely to see much more success.
Marketing can be a science if conducted properly. But you need to understand to whom youre marketing and what your potential customers motivations are. What that thought in mind, I recently asked several dozen chief marketing officers (CMOs) if they could know one thingand one thing onlyabout their customers, what would it be? As you can imagine, the answers were all over the place.
Some were a strange:
- What theyre telling their therapists.
- The customer’s Reptilian Motivation.
- What makes you cry at night?
- What their cell phone numbers are.
- What they do in their free time.
But most focused only around issues that matter:
- What makes my consumers like a particular product?
- What clients and prospects think of me?
- What do customers REALLY want?
- “What are we currently doing that would make you leave us?”
Strange or not, that question essentially comes down to how people make decisionsand theres only one reason why understanding this process is important: It lowers your cost of acquisition and increases your profits.
The following are four important steps for understanding that.
No. 1 It forces you to refocus on your objectives
You can’t really understand the decision-making process until you ask yourself A decision to do what?
Lets say you own a gym. Is the decision Sign up and exercise or Sign up, exercise and hire trainers for one-on-one sessions? These are two completely different decisions, two completely different business models. Lets look at them.
No. 2 It forces you to reassess your business goals and processes
Lets say what you want is for people to join AND work out AND use your trainers for private one-on-one sessions. Understanding what youre after forces you to understand:
Your goals. If you want to do $600,000 in business a year and your average private-lesson customer spends $1,500 per year (say, $40 a month for the gym and $1,000 in 10 lessons at $100 each), youll need to find a mix of private-lesson customers and gym-only customers that makes sense. This will affect several decisions:
- The space and equipment you need to accommodate them
- The monthly fees and cost per lesson (you need to find a mix that works for you).
- Your closing ratio: For every 10 people who visit the gym, how many sign up?
- For every 100 people you contact, how many visit the gym?
This might be a mix:
Click to enlarge
Of course, you have to ask yourself how comfortable these 17 lonely gym users would be. The next step then is to do a matrix:
This matrix will guide you back to your basic assumptions: What kind of gym do you want? What kind of people should you attract and whats their impact?
You might also play with the costs. For example, people who buy gym tutoring get a discount on monthly fees:
Click to enlarge
You could raise the monthly fees to $60 and then give a $20 discount when people purchase a package of 10 lessons at $100. From this grid, you can choose the gym configuration that would best meet your business model.
Your business processes:
- How do you sell the lessons and whats your closing ratio on those
- How do you advertise to get visitors? Whats your real cost of acquisition?
- Should you lower the number of people taking private lessons, increase the membership a bit and have a different mix? Would that mix produce the same revenues?