Marketing Data is Never 100% Accurate

Consistency is the Key to Proving ROI

Marketing today is being driven by data…and its effectiveness is being proven by data. However, there are many different ways calculations can be made – there are more loopholes to navigate than can be found in the tax code.

In order for data to be accurate, it needs to be complete, up-to-date and relevant. Look in your firm’s time and billing system, your email distribution list or your CRM. Is every piece of data in there? Probably not. However, you should strive for consistency to improve your accuracy. There a many ways to do this when firms place a priority on data integrity, but that’s a topic for another day. Let’s explore why no two firms will make the exact same calculations and the factors that will impact how calculations are is made.

Factors that Impact Formulas

One of the primary marketing measurements used is the cost of client acquisition. It shows how much money you had to spend to acquire a new client. Your long-term goal would be to lower that amount or at least keep it flat.

In simple terms, this would be calculated by looking at the amount you spent on marketing during a specific period divided by the number of new clients obtained in that same period. It would look something like this:

$600,000 (marketing spend) / 300 (new clients) = $2,000 (cost of each client acquisition)

However, we know not every marketing dollar that was spent was truly spent on activity that will bring in new clients. One could argue that country club dues, high school football program ads and client meals, for example, are not true acquisition costs even though they are part of your marketing budget. Rather, they are there to support other firm goals. So should you only include spending that was truly for new client acquisition? And what falls in that bucket?

On a similar note, one could argue that any new client that came in related to an existing client should be excluded from the calculation as that was a result of client service and not marketing spending…even if the client only heard about this service because they read an article in your magazine.

As you can see, what numbers go into this calculation are not so clear cut.

Perhaps cost of client acquisition is easier to look at for a specific event or within a certain marketing function. While there may be some truth to that statement, there are still assumptions that need to be made adding some area of grey.

Let’s look at that seminar you held last year. Total cost for the event was $5,000. In the past 12 months (you need a time measurement), you obtained two clients that were at that seminar. In that case, your cost per client acquisition for that seminar was $2,500.

$5,000 (total cost) / 2 (new clients) = $2,500 (cost per new client)

This calculation is also flawed because it assumes that no other marketing touches you made impacted the decision to attend that seminar or eventually buy. Did they have a favorable impression of you because you are members of the same association? Because they find value in your email newsletter? Because they follow you on Facebook?

The same holds true if you look at new clients obtained through digital marketing. In this case, you would look at spending related to your website, SEO, mobile, social media, etc. and divide it by the number of new clients that resulted from leads that came in through the website. It also assumes that no other factors (like the prospect heard a partner speak at a conference) contributed to the win.

The closer you can align spending from a marketing tactic to the result the marketing tactic produced, the closer you will be to a true acquisition cost, but even it will not be 100 percent accurate.

Consistency Matters

The key is picking a formula you think is fair and consistently applying it every time you make the calculation. You are looking for trends in that final number so you can change or tweak your marketing strategy. Don’t be surprised if the more analytical people you work with want to tell you it’s wrong. As long as you are calculating consistently, they can’t argue with a $50 drop in client acquisition. Even if the exact number was off by $10 or even $100, the fact that there was a decrease cannot be denied.

You have a wealth of data to pull into your calculations. Look for inspiration from other companies and CPA firms, but you should really start with what exactly you want to know and what data you have to help you prove it. Document how you made your calculations so you can use the same formula next time. You will find that consistency is what will help you prove your ROI.