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Research How to waste your marketing budget
March 10, 2015

When it comes to managing small business the customer is your most precious asset, your first priority. Today business is about customer relationship. Spending money on marketing is essential to reaching your target audience that may provide you with leads, your potential buyers. But there is much more that happens before you gain a customer. Despite how fine tuned your marketing is, if leads are not becoming buyers your missing all that opportunity. So where is all that marketing money going? This research was able to point out the flaws that I see all too often in small businesses and reveal the easy fix for them.

The Research

This idea came to me when I had an interesting experience trying to enroll in a new fitness club. Nowadays, the fitness industry is having its best time ever: everyone wants to be healthy, fit and beautiful. No wonder the competition among gyms is so high and there is such a great variety of fitness centers trying to get customers. Customers who will pay on average $75 a month, not including personal training sessions, gym accessories, sport drinks and etc.

When I was making my choice on the right gym, I did what anyone would do. I went online and I Googled it. I immediately checked the first searches Google.Adwords offered. I am one of the web-users who click the sponsored ads, as I believe if the company pays money to get my click they must have something good to offer.

I limited my search to two appealing fitness clubs. Then I visited their websites where I filled out a web-form, inquiring for a call back with more information on their fitness center. When none of two gyms I left my inquiry with called back I just wondered what was the point of the pricey advertising. I was confused, why would a company spend their budget on marketing and not give their leads the time of day? Especially when it comes to a good lead, like me, who is looking to pay for a yearlong membership (to keep myself motivated). These companies are paying double and triple for their advertising and despite that failed to gain a customer. Further research revealed that the company’s problem does not lay in the pure carelessness but a lack of customer relationship management.

Where does marketing budget goes to die

For my research I selected 20 gyms and fitness clubs in the Bay Area, who spend their marketing budget on Google.Adwords to find what could be causing them to loose leads. The bottom line is companies who use sponsored ads for marketing expect more clicks which means more customers, but that only works if the companies work with every lead. Otherwise that high priced advertising is getting you leads but no customers.

Here they are:

CrunchPlanet Fitness
Fitness SFVivre
EquinoxQuad
Active Sports ClubRetro Fitness
24 Hour FitnessGold’s Gym
Bay ClubIn-Shape
Mission Fitness CenterAnytime Fitness
JCCForma Gym
Snap FitnessCurves
Koko Fit ClubClub Sport Fitness

Acting as a secret shopper I contacted each gym with a simple story “I am very interested in buying the annual membership at your fitness club”.

The first step was filling out a webform on each company’s website, where I made sure to mention that I am particularly interested in buying the membership for the whole year (making myself a desirable hot lead), and that I would be waiting for them to call me back as soon as possible. Three out of 20 researched fitness clubs didn’t have a web-form on their website. Out of 17 gyms that received my web inquiry only 6 (!!!) called back within first 24 hours. As for the others: three sent me an email with invitation to visit facilities, 3 more just shot me a general email with the suggestion to call them myself, and the other five didn’t react at all. During my phone conversation with the six who did respond I was challenging the sales managers with questions about the facilities and pricing, and at the end asked them to call me back in a week to follow-up on my decision to become a member.

I didn’t stop there I called the other 14 research participants who failed to communicate earlier: 3 of them who didn’t have a web form, 6 who just wrote an email, and 5 who didn’t react on my inquiry at all. Two of the gyms who only sent emails were just impossible to get ahold of and after attempting to contact them several times I left a voicemail; again stating I wanted a year membership and asked them to call me back.

picture 1

I gave all 20 participants the same opportunity for a potential yearlong buyer and all they had to do was remember to call me back on the day we both agreed on.

Now, are you ready to hear the outcome?

Only 40% of gyms followed up with me in a week. Eight out of 20 research contestants called back on the specified day. Three additional gyms finally called me back, 5 to 6 days after the agreed date passed. Others had bigger issues like insistent sales managers, who didn’t want to talk on the phone no matter what, and kept sending email invitations with their availability, so I can find time that works best for them.

And when it came down to satisfaction on every level only 3 companies were actually working with leads on an excellent level. Only three, who reacted on a web-form within 24 hours, as well as asked a lot of questions regarding my interest in the gym, and also called back in a week. So, only three gyms properly knew how to work with a lead.

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And two of the research participants showed some fantastically bad work with the lead: they did not react on my web-form, when I called myself and tried asking questions, I was told to just come in, if I’d like to. Upon my request to take my phone number and to call me back I was told “we don’t have this feature here” but if I decide on their gym, I should call them back. Yes, please!

So, here’s the mystery: how come companies spend such a huge amount of money on advertising like Google.Ads and not work with leads they are paying to get?

What makes a difference?

Customer success is not based on the marketing budget companies spend, but on their Customer Relationship Management. It is this software that makes a difference in turning leads into buyers. If all of the research participants had great CRM-software the sales managers would have a chance for structured work with the lead. Here is what could have been done:

  1. Collect leads primarily with web-forms, which would give you a better opportunity for gathering contact information, be advised against issues, and get prepared for the call.
  2. Work with the leads closely while maximizing efficiency: Make sure your calls are happening on time, schedule visits and appointments negotiate the cost. Don’t try just to sell, but understand what issue you are resolving for your client.
  3. Set-up reminders and keep promises you give, give follow-up calls to every lead your marketing is bringing you.

Just three easy steps can help you grow the business and justify the amount of money you spend on marketing, by working closely with every lead. If you are a small business who is working hard to get more customers- then you probably would greatly benefit from having lead management service.

Jen Anders
Marketing manager