Every marketing campaign that you launch, every ad, every sales effort, every Facebook ad you run, and every direct mail effort needs to be measured and quantified so you know if it’s effective or not.

That’s the benefit of using direct response marketing.

It’s critically important to determine a way that you can pinpoint how each prospect and customer finds a way to your business. If you’re not doing that now, you’re making a big mistake.

Your marketing is successful if it brings you prospects. If you’re not able to convert these prospects to customers, there might be just a sales problem, not necessarily a marketing problem. However, your marketing incorrectly could bring you prospects that aren’t really qualified to buy your services or products.

The formula for measuring the cost of your marketing campaign is very simple. It takes into account the net marginal income per inquiry or prospect as well on the money per customer basis.

What this means is you need to write down the total cost of the ad, sales effort, commission or whatever you’re doing to get that person in the door.

Now write down how many inquiries you got or how many prospects you generated. Now you know the average cost per prospect.

Take the total cost of the ad and divide it by the total inquiries. This gives you the average cost per prospect.

Write down the number of customers generated from those prospects. Now you know your average cost per customer.

Take the total cost of the ads and everything, and divide the cost by the number of customers you got.

Now you know the average cost it takes to get a customer, the average sale per prospect, and the average sale per customer.

This gives you your net income per each prospect and per each customer.

Although your prospects haven’t generated any cash benefit, they were generated by your marketing effort, so we also calculate the cost per prospect when we compute this information.

Now you know how profitable this campaign was or if it was profitable at all.

When you use the Cost Per Inquiry Method of evaluating your marketing, you’re focusing on the most important part of your marketing and that is how many people responded to your ad. That’s what you want to know.

When you’re talking to ad reps, they will try to sell you on the cost per exposure – turn around and run. They’ll sell you based on circulation of their media or their listening audience. That’s not how to do it. You need to be using the Cost Per Inquiry Method because then you’ve moved into actual measuring of the success of your ad.

The hardest part about this is tabulating the information. You have to make sure you track where your inquiries come from. Whether they come from telephone calls. Whether they just stopped by. Whether they mailed something in to you. If that’s the case, code the return cards or information they would mail to you so you know where it came from. Any forms of inquiry need to be identified.

There are traditional ways to increase or improve this Cost Per Inquiry. Any reduction in the cost of your advertising will have a positive effect on reducing that cost. Pay close attention to the size and location of your ad and what you’re paying for them.

The other traditional way to improve the Cost Per Inquiry is if you’re able to select the form of advertising and the structure of the copy.? Be sure the vehicle used delivers it properly. Then you might be able to increase the number of inquiries relative to the dollar cost. You can reduce the cost of your advertising or just increase the number of prospects you get.

In both approaches, the result will increase the productivity of your advertising dollar. You’re focusing on a true cost measure of your advertising effectiveness instead of just theory.