[MUSIC] Good. So you're a lot more knowledgeable in all the different media. Next thing you need to know, is to make sure that you're not squandering your resources. So we need to spend some time on measurement. One thing is said about advertisement. Since the invention of marketing until today, most people are conceived that more than 50% of all the advertising dollars are wasted. The problem of course, and here is the punch of the joke is that you won't know which half is the good one and which half is the bad one. So let's spend a little bit of time to see how I am going to measure the effectiveness of any particular media. In order not to squander resources, it is particularly useful to break down the sale process. All the way from when you're actually acquiring prospects or leads, to when you're qualifying the traffic all the way to conversion and repeat businesses. Much like in the graph that is show. This is a typical sales process. And as I said before, it is really useful to break it down to evaluate how effective you're being. Either at the message, or using the right media at every single one of those stages. So, in order to evaluate the different media. Let's go back to our examples from the homes in Mexico. Let's suppose, that the company that customizes markets and sells homes is spending on many, many different kinds of media. And they're required for business cycle purposes or financial crisis purposes to cut down on marketing. How would you go about cutting down different things? Let's suppose they're spending in bulk mail, in search engine marketing, keyword bidding, display marketing. That they are spending on magazines and newspapers and on television and radio. How will you go about determining which one to cut? Two very important measurements are those of effectiveness and efficiency. First of all, you want to see what is the cost to acquire a lead in every single one of those different media. Correct? What would be the other important metric that you would want to consider? It is that of effectiveness. Let's look at this picture, right? Here on the y column, we have the cost per prospect. And on the x axis, we have the ratio of the number of sales acquired to the overall number of prospects that I have put into the sales funnel. Right? As you can see, these two simple indicators will give you a pretty good idea as to what media works best for acquiring and closing sales. Let's assume that on the y axis you have the cost in Mexican pesos for the different media. And what does it cost to bring leads into the sales funnel. And on the X axis you have the conversion ratio. What percentage of all the leads that are coming from those different medias are actually converting into sales? Furthermore we have inside the graph all the different media that are used. So if your boss now asks you to. Hey, we need to cut down a little bit on spending, because we're going through difficult times. Which ones will you cut? Now obviously, you're in a much better position to know which ones to cut. Everything that is very costly, and that is not very effective like converting traffic such as local newspapers, free newspapers, or regional magazines are prime candidates for cutting. But just by looking at this picture. Can you already decide what needs to be cut? Clearly not. So far you have only decided. How effective and how efficient are the different media channels at attracting and converting traffic? However, there is a very important other critical element. You need the reach and the volume. You need to be able to know how many actual costumers is each one of these channels bringing to your business. For that you need to do the following analysis. Right. You need the actual size of sales that are coming from the different channels. Before cutting at the very minimum, you will want to perform this analysis. Now,you are in a much better position to asses whether cutting local newspapers, free newspapers, or regional magazines might be good idea or not a good idea. Some of those sales might still be very, very profitable. So by actually cutting the marketing spend, you may be shooting yourself in the foot. So, that does not mean that you know exactly how each one of those channels is working. But you're in a much better position. There is still, there may be cross dynamics between the different channels. For example, we know that advertising online and advertising offline works better, and it multiplies the effect. Than just simply reaching customers by only one of those methods. So the co-cost attribution, or how one channel impacts the effect of the advertising of the other channel and vice versa. That is the holy grail of marketing. Still we have not yet done this for this particular media. And you hope you will have to carry that particular analysis for the specifics of your business. But at least you're in a much better position to remember how to measure the return on investment from your different companies. [MUSIC]
