Marketing costs money.
The expense is easy to quantify in traditional marketing investments like buying ad space – did the price per inch justify how much it brought you in sales? Newer strategies like inbound marketing can be trickier to measure. They may not require an upfront purchase but end up costing you in the form of an hourly rate on the labor required to execute them. No matter how the bill reads, evaluating a marketing strategy always comes back to its ROI: was what you paid worth the return?
“Return” in this context is synonymous with “Revenue,” which makes this traditional marketing concept difficult when applied to a pre-launch start-up. When revenue is not yet an available metric, how do you evaluate your marketing investments?
Marketing Metrics Without Revenue
We’re trying to answer this question while marketing our storage software, AetherStore, and have been using the number of AetherStore Early Release Signups in place of sales figures. Signing up for early release is as far as potential AetherStore customers can get in our marketing funnel while we’re pre-launch, so for now if a marketing expenditure compels an individual to reach that point it’s been successful.
Having an online signup form makes it easy to differentiate between marketing channels. Through Google Analytics we can pinpoint how our signups found us, for example through organic search, social media, paid AdWords, this blog, etc. To an extent, we can also track the source of leads that sign up after hearing about us offline. For example, we exhibited at NY Tech Day last week and had hundreds of conversations, during which we mentioned and passed out materials promoting an AetherStore URL we had set up specifically for TechDay. Signups that came through that specific form are easily traced back to the event, allowing us to measure the “return” on our time there by counting how many signups it produced.
“Unpaid” Advertising Gets Expensive
This isn’t a perfect metric. One element it doesn’t account for is the quality of signups. We have a small budget for Google AdWords and a number of signups have come through this channel. We don’t spend a lot of money or time (which end up being the same thing) on our paid ads and they continue to produce signups, which makes them a sound investment if we’re looking only at the numbers. Yet, I know the quality of those signups is lower because of the background information provided and the lower engagement rates we have post-signup with these leads.
On the other hand, our signups that find us through social media have been more likely to engage with follow-up contact up and seem to have stronger potential as customers. This is a result that any inbound marketer would have predicted: when someone finds us on social media it’s often because someone they follow has mentioned our brand, so their discovery of AetherStore is like a peer recommendation. It’s more “organic” than what we get from a paid ad. However, just because it’s free to set up a Twitter handle doesn’t mean these leads aren’t expensive. Cultivating the online relationships that produce inbound leads requires an immense amount of time (see: money). All told, they require more resources to generate than the signups that come through our Google Ads.
Thus the problem with using signup numbers as the sole metric in evaluating our marketing efforts: they don’t account for quality. If we invest $1000/month into both mediums and get more signups via Google Ads, ROI favors the ads over social media. In reality, we know social media is probably the better investment.
Quality Over Quantity
The fact that I have to use the word “probably” brings me to the main problem we face evaluating marketing efforts while AetherStore is pre-launch: we can’t assign a dollar amount to an AetherStore Early Release Signup. The ROI analysis depends on both sides of the equation being a monetary value, so it’s simple to see whether the return is high enough to validate the investment. Right now, we can only project how much revenue our marketing investments will bring in based on how we plan to price the software and how many signups we think will actually buy.
We’re banking on the assumption that more signups = more potential customers, but we don’t know with certainty that the number of signups produced by any of our marketing expenditures will produce enough cash to justify the investments. It’s what’s exciting, and most difficult, about marketing at a start-up: until we can actually calculate ROI by tracking revenue, we’re working with a far more qualitative definition of what constitutes a good “Return” on investment.