Analyzing Results – The Profit Margin Fallacy

Hello friends and happy Thursday!!!! The weekend is almost here and September is half gone – it’s hard to believe.

I wanted to talk about how we and our clients analyze the results from our various marketing campaigns. In too many cases over the years, I’ve heard business owners and clients deem a campaign a failure because the profit margin was not what they expected. It’s like the only thing that mattered from the entire marketing campaign was how much money they made and I’m here to tell you – that is short-sighted analysis. Profit is a key component of any marketing campaign – but it’s only one part of judging if a campaign was successful…. one part among many that need to be examined.

You may be asking… but isn’t the goal of a campaign to make the most money, sell the most widgets or get customers into your establishment to spend their money on your food or product? Well, the answer to that is yes…. and no. The results of a marketing campaign, especially in 2018 where most of it is done in the digital world, cannot be simplified to only one metric. Or doing analytics seems like the image below:


So, what are these other metrics and why do they matter? Glad you asked, let’s begin, shall we:

Branding and building customer relationships:

I sound like a broken record – but I cannot stress enough how important a clear and concise brand message means to your marketing and results. Making sure that all your posts on Social Media convey the core values that define your business and it’s goals is immeasurable. Aligning your business and with causes you care about builds this brand, the memes/images/media you post and even something as simple as a Mission Statement connect and resonate with  prospects and customers in a way that is more valuable than the bottom line. The reason it is more valuable than profit margin is simple – it creates brand ambassadors for you!!!! 

When you have a loyal following on social media, your followers become an extension of your brand image, because they connect with it on a personal level.

So, even if they are not in the market for your widget or maybe not going out to dinner on a particular night, if someone asks for a recommendation as to what to buy or where to go – they will more than likely recommend your business. This is all due to taking the time to build your brand image via your marketing campaign. You may not recoup the money spent on that campaign in one shot – but if done right, you create life time value via your brand ambassadors.

Pricing Issues:

Let’s say, you’ve created the perfect brand image – and you get your brand ambassadors… and you still aren’t seeing results. The culprit in most cases is either the promotional creative you are using or the pricing you offer is not competitive.

For example, if one of the concepts you want to market is that you have the best widget for a certain purpose. And you know it’s the best widget, reviews from consumers confirm this – and yet, you aren’t selling as much as you’d like. While it may be true that you have the best widget, but Bob’s store down the street has a similar widget, not as good but comparable, but it’s a little less expensive. To make matter worse, there are multiple stores that offer similar widgets at a lower cost on the same street and local area.

The example above is how being focused in on profit margin hurts your marketing results. Just having the best widget does not guarantee success. If consumers can find similar products at a more economical price, they will more than likely go that route than pay the extra for your widget. In 2018, our economy has not fully recovered, so consumers still don’t have a lot of excess funds to spend. They want value for their purchasing dollars.

Even if this means that your profit margin will be slightly lower and you’ll make a little less per widget – is it better to sacrifice business for a few extra dollars. Or does it make more sense to sell more at a lower price point and still be successful? If one were to only look at profit margin, they are missing the bigger picture.

In closing, the point here is don’t get hung up on profit margin as the key response metric. Monitor the feedback on your Social Media sites and your reviews. Are people responding and aligning with your brand image, as you define it. If so, then your marketing campaigns may not pay off immediately – but you’ve buildtlife time value for your product or establishment – and that is a result more profitable than your profit margin.

Have a great night!!!


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