Direct vs Indirect Marketing
Marketers and club operators know all too well the challenge of tracking and measuring response rates that lead to conversions.
Acquisition cost is a common metric health clubs use to measure marketing campaign performance. It’s a simple formula: Total Campaign Cost / Conversions = Acquisition Cost. For example, a Campaign Cost of $10k with 100 Conversions, equals a $100 Acquisition Cost per new membership.
The only thing that matters is how much it costs to bring in each new membership. Most clubs have a threshold for how much is spent to acquire each new membership and use this as the basis for all marketing endeavors. All new joins go into the same bucket and the calculation is done to determine if the campaign is a success – or not. It’s clean, easy to prove out and gives club operators confidence in the productivity of their marketing efforts.
Or does it?
Is this truly the appropriate metric to gauge marketing productivity? Truth is, a lower acquisition cost doesn’t guarantee more money was made. With this approach how do club operators know which marketing efforts are profitable? And isn’t this the real question to be asking?
It doesn’t make sense to set the same acquisition cost for a short-term option as for a longer-term membership type because each contribute differing values to the club’s long-term prosperity. On the back end when measuring campaign results, it’s even more egregious to assign all new joins the same value!
A club’s profitability resides to a large extent, in the mix of short-term and contract membership revenues. Most clubs offer several membership types with corresponding price points. These membership types contribute to the club’s profitability in different ways and need to be evaluated accordingly. Hence, the truth of the matter can be found in calculating campaign ROI.
Smart marketers don’t rely on acquisition cost to assess marketing efficacy. The smart marketing approach uses data in an intelligent way to confidently gauge campaign success through ROI calculations to determine the critical performance indicator: profit.