What’s the secret to a product that flies off the shelves or a cafe with lines out the door?

Because for every hot, top-selling product, there’s dozens more that land in the market with a dud. This includes excellent products that should be an easy sell.

Sometimes a product has an auspicious beginning. It receives rave reviews and its designers are eager to sell more. But despite much pitching and promotion, the momentum never builds. The creators are flummoxed. What’s the hangup? Is it the website? The product? The price?

It’s hard to say. Acquiring customers is a complex, multi-faceted process. It entails developing a product or service with market demand, building a platform with a pleasant user experience, researching the customer and crafting a marketing plan.

Market research is at the crux of putting all these pieces together. It includes knowing how the user responds to the product, and how and where to engage with the customer. It’s also necessary to stay on your toes, as the needs of the customer constantly changes.

Good market research and analysis reveal the secrets to fly-off-the-shelf success. And research tools are key to conducting this research. Let’s look at some market research tips, plus tools and strategies to acquire and retain customers.

5 Market Research Tips

For the most part, market research is a data-driven discipline. The overall objective is to increase a company’s ROI by connecting a product to its corresponding market.

Research and data serve many functions. They connect a product to the actual customer, rather than simply rely on feedback from family and friends. They reveal how a product might be tweaked to appeal to the market. Sometimes, they confirm information you already know. Or else data reveals that there isn’t a market at all, which saves time with pitching and marketing. Ultimately, the research serves as a foundation for a customer acquisition strategy.

But with so much information out there, it’s easy to get buried in the data and have it serve no purpose at all. These following pointers allow market research to pave the way to an effective strategy.

Complement Data With Immersion

In the same way that political polls don’t measure enthusiasm for a candidate, a series of numbers, even when accurate, don’t give the full picture of a market. Immersion within the market fills out the picture and colors in those areas that raw data leave blank.

Consider a kitchen supply company that’s marketing to residents in a large, crowded city. Perhaps raw data indicates that the market is hot for the product. However, visiting several homes within the market turns the black and white data into a full-color photo. Understanding the size and layout of a typical city kitchen provides clear directives in both how to tweak and pitch the product to the market.

Pitch to the Fringe, Not the Mean

Many products appeal to large diverse markets with people of various ages, income levels and geographic locations. It’s easy to simply crunch the data and come up with an “average” person. Market researchers have found, however, that when you try to appeal to everyone, you end up appealing to no one at all.

Say the range of ages in a given market spans from 18 to 56 years old. The “average” market, then, is someone in her late 30s. However, pitching exclusively to thirty-somethings completely sideline both the 18 and 56 years olds.

A more successful approach is to pitch to the fringe. It’s to splice and dice the data to develop several distinct but accurate prototypes, such as the single millennial, the retired professional and the college student, and develop separate pitches for each.

Emphasize ROI

Have you ever had a conversation that went on forever yet never seemed to go anywhere? Market research can start to look like one of these rambling conversations. It’s so easy to amass mountains of data that yield nothing but unfocused, convoluted discussions and presentations.

The goal for a product or service, of course, is to serve the bottom line. And so ROI provides the focus and through line to all market research. This means identifying actual buyers, not just lurkers. Luxury goods, for example, may appeal to a broad market. But only a demographic with surplus income is going to bite.

Find the Story

Market research is about unearthing what motivates a customer to buy. It identifies where a product or service fits into the user’s lifestyle, or how it may even totally change a lifestyle for the better. And so it’s much more than compiling and analyzing data. Ultimately, it aims to tell a story.

An app that allows users to order meals to go, for example, isn’t just looking for the target market in terms of demographic details like age and median income. More so, it seeks to understand how the app benefits the user. If it gives working mothers a night off from fixing dinner, that’s a story that provides ready fodder for a marketing campaign.

Dig Beyond the Data

The market won’t always tell you about themselves. And the data can conceal critical information as well. Knowing the market means asking a lot of questions, from the mundane to the sublime. Details like free time activities, favorite foods, significant holidays and typical family size provide insight into both how to reach the customer and how the product fits into their lives.

This summarizes a few pointers to augment market research. Now let’s turn our attention to powerful market research tools.

12 Market Research Tools

Market research is a broad topic. It consists of product development, customer research, marketing, architecture and customer retention strategies. It gathers both qualitative and quantitative data.

Whether the objective is to build a website that’s easy-to-use, monitor social media accounts, or identify the price point for a product, there’s a tool out there to achieve any end. Finding the right tool first means identifying the objective. The following covers several tools arranged according to an assortment of topics.

Customer Research Tools

These tools allow you to get to know your customer, intimately. When you understand not just the demographics of the target market, but ethnographic details as well (customs, habits, aspirations), it’s possible to develop a marketing plan that engages and builds brand loyalty. It also makes it easy to tweak and adjust the product to better suit the market’s needs.

Typeform

Typeform offers feedback forms, satisfaction surveys, quizzes, polls, and even videos for 1:1 conversations with customers. This tool makes it easy to gather critical signals from users and customers right away. A recurring pattern in survey results, for example, may indicate changes in the market. A consistent complaint in feedback is a red flag that a product needs to be updated.

Typeform integrates with dozens of applications, and offers three plans with price points suitable to a range of customers.

Field Agent

Field agent’s diverse services provide valuable market research from your actual customers in real time.

It connects you with mystery shoppers who visit your business and let you know all about the experience. They can also photograph your product within retail locations, so you know just how it’s presented to customers. It connects you with real customers who provide photographs of your product within their home, providing full immersion into the culture of your target market. Its concept testing feature allows you to give the product a trial run before launching it. Plus, Field Agent offers insight on competitors!

All of these diverse tools are available on one simple platform, allowing you to peek into markets all over the country from your office.

UX Tools

User Experience is like the roadway that introduces customers to your brand and your product. If you offer a smooth ride, they’ll probably stick around. But if it’s bumpy and clunky, they’ll more than likely turn around and leave right away. These tools allow you a peek inside the current UX of your customers, and develop an intuitive structure to your website or online store that keeps customers on your site.

Optimal Workshop

Optimal Workshop compiles data from actual visitors to your website, then analyzes it to craft a fluid architecture. Some of its tools include qualitative research, card sorting, tree testing and first click testing.

Card sorting is a popular method for building architecture that logically arranges pages on a website in the way one might construct a mind map. It builds the architecture from patterns in multiple card sorts. Tree sorting confirms the discoveries from card sorting, and irons out any kinks. First click testing identifies the popular and ignored regions of your website by providing data on the journey of actual users on your site.

These tools have been utilized by some of the best websites on the market. Optimal Workshop’s customers include Uber and Yelp. It offers several plans at various price points, including a free plan.

Hotjar

Website layout is tricky business. Sometimes a user completely ignores those areas of your website you most want them to be going to. Hotjar’s observation, feedback and engagement tools work together to analyze your website and identify areas for improvement.

Its Heatmap tool identifies the “hot” and “cold” regions of your website, providing valuable clues as to the language and graphics that grab visitor’s attention. It allows you to engage and solicit real-time feedback in 1:1s with your website visitors.

Hotjar’s tools have assisted some of the best to build strong platforms, including Nintendo, T-Mobile and Panasonic. Lest you repeat the mistakes of those who’ve gone before, it showcases a wealth of case studies from various industries.

Hotjar offers several plans, including a free plan.

Content Creation Tools

In a climate where content is king, every company is subject to the rules of content marketing. The following tools provide shortcuts in this vast marketing region, and guidance to create engaging content that generates clicks, likes and follows.

Buzzsumo

With Buzzsumo, all your content will be fresh and evergreen. Its powerful analytics tools alerts you to trending topics for blog posts and other content. It allows you to stay abreast of the fast-paced world of the internet, keeping tabs on account engagement and competition. Its tools serve various platforms, including Facebook, Twitter, Reddit and YouTube.

Although Buzzsumo charges a hefty fee, it’s worth it. You’ll never have to worry that you’re creating stale or boring content again.

Flick

Flick makes it easy to create keyword-rich content that targets your ideal customer. Its hashtag features allow you to enter online conversations as they’re happening, and engage with your customer on trending topics. Plus, it provides tips for content creation in both videos and blog posts. Flick serves a range of clients, and offers solo and agency plans

Sprout Social

Sprout social provides a multitude of products and services for online research and marketing. Its customer insight, broken down by industry, is key to understanding your audience. It analyzes social media trends and breaks data down by region. This service is geared to larger businesses and enterprises.

Storytelling and Presentation Tools

On its own, research and data do not reveal a whole lot, nor is it terrifically compelling. Storytelling and presentation tools serve a dual purpose. They piece dry sets of data into a whole, complete picture that follows a customer journey, and identifies his or her motivations, compulsions, challenges and hangups. Further, they allow you to turn dry market research into an engrossing, can’t-look-away-from presentation.

Pip Decks

With Pip Decks, you’ll never be met with glazed eyes or yawns during a presentation again.

This deck of cards offers step-by-step guidance to weave a story into a presentation. The cards draw on a number of archetypal story patterns, including the rags to riches story and the hero’s quest. Its easy-to-use system meets you right where you are in your presentation development, whether it’s concept development, character development, or structure.

Pip Decks assist with marketing as well. They allow you to identify your customer’s story, and build a marketing plan around it. Although the deck is a bit pricey at $200, once you’ve made the investment, it’s yours to keep. There’s no recurring payment with Pip Decks. (The digital cards are only $100.)

Keynote

Crafting market research into a compelling story is no simple feat. And all that work deserves the right presentation tool.

Keynote is popular for a reason. It’s Apple’s answer to Powerpoint and it really steps up the game. Its large selection of themes lets you add just the right tone to a presentation, and it includes plenty of diagrams and illustrations to spice things up. With Keynote, it’s easy for remote teams to collaborate from Apple Devices or a PC.

Keynote’s adaptation with Keynotopia provides further versatility. Keynotopia is a UI kit that allows you to present UX experience to the team in real time, with mockups and interactive prototypes. It allows everyone to contribute ideas and suggestions to improve website architecture.

Platform-Specific Tools

Market research tools are oriented to a specific need. And some tools are so specific they hone right in on the very platform where your customer congregates. Tools such as Jungle Scout, Alura and Tera Peak focus exclusively on the enormous seller platforms of Amazon, Etsy, and Ebay. They aid and fuel sellers to optimize the platform and its services, and provide powerful analysis tools to develop a product and reach the customer.

Jungle Scout (Amazon)

Amazon holds the lion’s share of online sales. And Jungle Scout allows you to lasso the enormous lucrative capacity of this platform.

Its features include a sales estimator that projects monthly revenue for a given product and automations to save time with listings. Plus it assists with product development by providing key metrics around market saturation for certain items.

While many recommend this tool, others believe that a seller can succeed on Amazon without Jungle Scout.

Alura (Etsy)

Etsy’s market research tool, Alura, allows you to build a strong presence on this popular online platform.

Its filtering tool simplifies customer retention. It’s easy to identify repeat customers and send out benefits and perks to those VIP customers you want to keep coming back. It also makes it easy to remind customers to leave reviews. And a top-rated shop receives more traffic and increased sales.

Alura offers three affordable price plans, including a free plan for up and coming Etsy sellers!

Tera Peak (Ebay)

Tera Peak is Ebay’s exclusive market research tool. It includes a product research feature that provides data around average price points and competition for a product. It indicates a product’s sales trend as well. It keeps up on your shop’s inventory by reminding you when it’s time to restock. Some are upset that Tera Peak has removed its keyword tool, making it difficult to label a product for optimal search results.

Tera Peak is remarkably affordable, with plans that fall around $15 a month.

And this summarizes a few tools to employ in your customer acquisition strategy. Now let’s consider some methods for keeping these customers coming back.

3 Customer Retention Strategies

A good marketing plan distinguishes between new and existing customers. Once you’ve gained a few customers, it’s so much easier to keep them coming back than to hit the pavement and find new ones. And according to data, it’s also much cheaper.

And so a customer retention strategy is a necessary component to a marketing plan. Retaining a customer really begins from when a customer first hears about you or walks in the door. It’s about engaging and enticing and building momentum for your brand at every stage of the customer arc. It takes time for loyalty to develop. But it’s worth it, as a truly dedicated customer becomes an ambassador for your brand, which is free marketing!

Let’s look at a few key touch points for connecting with customers and bringing them back time and again.

Stay Front of Mind

A customer may be delighted with your service or product, but in the busyness of their lives, they lose your contact, forget the name of your website, or never stop inside your studio again. It’s up to you, the owner, to remind them about you and make it easy for them to return.

This needn’t be obtrusive. Reaching out to customers with a quarterly newsletter serves as a gentle reminder of your brand and services. Gaining a following on social media and posting regular content achieves this same end as well.

Reward Customers

A reward program that’s offered exclusively to repeat customers appeals to them in two ways. If the reward is achieved incrementally, it builds momentum toward the incentive. This is the case with something like a coffee shop punch card. The customer, anticipating the freebie they’ll earn, comes back time and time again. Secondly, this discount includes your customers in an exclusive club. Who wouldn’t want to patronize a business who made them feel prized and valued?

Rewards can be offered in the form of punch cards, loyalty cards, or seasonal discounts.

Personalize it

Repeat customers are your VIPs, so it’s good to take the extra measures to let them know it. Find ways to connect with them personally. Remember their birthdays with a card, an email or a freebie. Get to know them as a person and follow up on their lives whenever you see them.

Suppose you’re trying to convince your friend to watch your favorite movie. You could either tell them about the intriguing plot or show them the exciting trailer.

To find out which approach works best, you try both methods with different friends and see which one gets more people to watch the movie.

Marketing experiments work in much the same way, allowing businesses to test different marketing strategies, gather feedback from their target audience, and make data-driven decisions that lead to improved outcomes and growth.

By testing different approaches and measuring their outcomes, companies can identify what works best for their unique target audience and adapt their marketing strategies accordingly. This leads to more efficient use of marketing resources and results in higher conversion rates, increased customer satisfaction, and, ultimately, business growth.

Marketing experiments are the backbone of building an organization’s culture of learning and curiosity, encouraging employees to think outside the box and challenge the status quo.

In this article, we will delve into the fundamentals of marketing experiments, discussing their key elements and various types. By the end, you’ll be in a position to start running these tests and securing better marketing campaigns with explosive results.

Why Digital Marketing Experiments Matter

One of the most effective ways to drive growth and optimize marketing strategies is through digital marketing experiments. These experiments provide invaluable insights into customer preferences, behaviors, and the overall effectiveness of marketing efforts, making them an essential component of any digital marketing strategy.

Digital marketing experiments matter for several reasons:

• Customer-centric approach: By conducting experiments, businesses can gain a deeper understanding of their target audience’s preferences and behaviors. This enables them to tailor their marketing efforts to better align with customer needs, resulting in more effective and engaging campaigns.
• Data-driven decision-making: Marketing experiments provide quantitative data on the performance of different marketing strategies and tactics. This empowers businesses to make informed decisions based on actual results rather than relying on intuition or guesswork. Ultimately, this data-driven approach leads to more efficient allocation of resources and improved marketing outcomes.
• Agility and adaptability: Businesses must be agile and adaptable to keep up with emerging trends and technologies. Digital marketing experiments allow businesses to test new ideas, platforms, and strategies in a controlled environment, helping them stay ahead of the curve and quickly respond to changing market conditions.
• Continuous improvement: Digital marketing experiments facilitate an iterative process of testing, learning, and refining marketing strategies. This ongoing cycle of improvement enables businesses to optimize their marketing efforts, drive better results, and maintain a competitive edge in the digital marketplace.
• ROI and profitability: By identifying which marketing tactics are most effective, businesses can allocate their marketing budget more efficiently and maximize their return on investment. This increased profitability can be reinvested into the business, fueling further growth and success.

Developing a culture of experimentation allows businesses to continuously improve their marketing strategies, maximize their ROI, and avoid being left behind by the competition.

The Fundamentals of Digital Marketing Experiments

Marketing experiments are structured tests that compare different marketing strategies, tactics, or assets to determine which one performs better in achieving specific objectives.

These experiments use a scientific approach, which involves formulating hypotheses, controlling variables, gathering data, and analyzing the results to make informed decisions.

Marketing experiments provide valuable insights into customer preferences and behaviors, enabling businesses to optimize their marketing efforts and maximize returns on investment (ROI).

There are several types of marketing experiments that businesses can use, depending on their objectives and available resources.

The most common types include:

A/B testing

A/B testing, also known as split testing, is a simple yet powerful technique that compares two variations of a single variable to determine which one performs better.

In an A/B test, the target audience is randomly divided into two groups: one group is exposed to version A (the control). In contrast, the other group is exposed to version B (the treatment). The performance of both versions is then measured and compared to identify the one that yields better results.

A/B testing can be applied to various marketing elements, such as headlines, calls-to-action, email subject lines, landing page designs, and ad copy. The primary advantage of A/B testing is its simplicity, making it easy for businesses to implement and analyze.

Multivariate testing

Multivariate testing is a more advanced technique that allows businesses to test multiple variables simultaneously.

In a multivariate test, several elements of a marketing asset are modified and combined to create different versions. These versions are then shown to different segments of the target audience, and their performance is measured and compared to determine the most effective combination of variables.

Multivariate testing is beneficial when optimizing complex marketing assets, such as websites or email templates, with multiple elements that may interact with one another. However, this method requires a larger sample size and more advanced analytical tools compared to A/B testing.

Pre-post analysis

Pre-post analysis involves comparing the performance of a marketing strategy before and after implementing a change.

This type of experiment is often used when it is not feasible to conduct an A/B or multivariate test, such as when the change affects the entire customer base or when there are external factors that cannot be controlled.

While pre-post analysis can provide useful insights, it is less reliable than A/B or multivariate testing because it does not account for potential confounding factors. To obtain accurate results from a pre-post analysis, businesses must carefully control for external influences and ensure that the observed changes are indeed due to the implemented modifications.

How To Start Growth Marketing Experiments

To conduct effective marketing experiments, businesses must pay attention to the following key elements:

Clear objectives

Having clear objectives is crucial for a successful marketing experiment. Before starting an experiment, businesses must identify the specific goals they want to achieve, such as increasing conversions, boosting engagement, or improving click-through rates. Clear objectives help guide the experimental design and ensure the results are relevant and actionable.

Hypothesis-driven approach

A marketing experiment should be based on a well-formulated hypothesis that predicts the expected outcome. A reasonable hypothesis is specific, testable, and grounded in existing knowledge or data. It serves as the foundation for experimental design and helps businesses focus on the most relevant variables and outcomes.

Proper experimental design

A marketing experiment requires a well-designed test that controls for potential confounding factors and ensures the reliability and validity of the results. This includes the random assignment of participants, controlling for external influences, and selecting appropriate variables to test. Proper experimental design increases the likelihood that observed differences are due to the tested variables and not other factors.

Adequate sample size

A successful marketing experiment requires an adequate sample size to ensure the results are statistically significant and generalizable to the broader target audience. The required sample size depends on the type of experiment, the expected effect size, and the desired level of confidence. In general, larger sample sizes provide more reliable and accurate results but may also require more resources to conduct the experiment.

Data-driven analysis

Marketing experiments rely on a data-driven analysis of the results. This involves using statistical techniques to determine whether the observed differences between the tested variations are significant and meaningful. Data-driven analysis helps businesses make informed decisions based on empirical evidence rather than intuition or gut feelings.

By understanding the fundamentals of marketing experiments and following best practices, businesses can gain valuable insights into customer preferences and behaviors, ultimately leading to improved outcomes and growth.

Setting up Your First Marketing Experiment

Embarking on your first marketing experiment can be both exciting and challenging. Following a systematic approach, you can set yourself up for success and gain valuable insights to improve your marketing efforts.

Here’s a step-by-step guide to help you set up your first marketing experiment.

Identifying your marketing objectives

Before diving into your experiment, it’s essential to establish clear marketing objectives. These objectives will guide your entire experiment, from hypothesis formulation to data analysis.

Consider what you want to achieve with your marketing efforts, such as increasing website conversions, improving open email rates, or boosting social media engagement.

Make sure your objectives are specific, measurable, achievable, relevant, and time-bound (SMART) to ensure that they are actionable and provide meaningful insights.

Formulating a hypothesis

With your marketing objectives in mind, the next step is formulating a hypothesis for your experiment. A hypothesis is a testable prediction that outlines the expected outcome of your experiment. It should be based on existing knowledge, data, or observations and provide a clear direction for your experimental design.

For example, suppose your objective is to increase email open rates. In that case, your hypothesis might be, “Adding the recipient’s first name to the email subject line will increase the open rate by 10%.” This hypothesis is specific, testable, and clearly linked to your marketing objective.

Designing the experiment

Once you have a hypothesis in place, you can move on to designing your experiment. This involves several key decisions:

Choosing the right testing method:

Select the most appropriate testing method for your experiment based on your objectives, hypothesis, and available resources.

As discussed earlier, common testing methods include A/B, multivariate, and pre-post analyses. Choose the method that best aligns with your goals and allows you to effectively test your hypothesis.

Selecting the variables to test:

Identify the specific variables you will test in your experiment. These should be directly related to your hypothesis and marketing objectives. In the email open rate example, the variable to test would be the subject line, specifically the presence or absence of the recipient’s first name.

When selecting variables, consider their potential impact on your marketing objectives and prioritize those with the greatest potential for improvement. Also, ensure that the variables are easily measurable and can be manipulated in your experiment.

Identifying the target audience:

Determine the target audience for your experiment, considering factors such as demographics, interests, and behaviors. Your target audience should be representative of the larger population you aim to reach with your marketing efforts.

When segmenting your audience for the experiment, ensure that the groups are as similar as possible to minimize potential confounding factors.

In A/B or multivariate testing, this can be achieved through random assignment, which helps control for external influences and ensures a fair comparison between the tested variations.

Executing the experiment

With your experiment designed, it’s time to put it into action.

This involves several key considerations:

Timing and duration:

Choose the right timing and duration for your experiment based on factors such as the marketing channel, target audience, and the nature of the tested variables.

The duration of the experiment should be long enough to gather a sufficient amount of data for meaningful analysis but not so long that it negatively affects your marketing efforts or causes fatigue among your target audience.

In general, aim for a duration that allows you to reach a predetermined sample size or achieve statistical significance. This may vary depending on the specific experiment and the desired level of confidence.

Monitoring the experiment:

During the experiment, monitor its progress and performance regularly to ensure that everything is running smoothly and according to plan. This includes checking for technical issues, tracking key metrics, and watching for any unexpected patterns or trends.

If any issues arise during the experiment, address them promptly to prevent potential biases or inaccuracies in the results. Additionally, avoid making changes to the experimental design or variables during the experiment, as this can compromise the integrity of the results.

Analyzing the results

Once your experiment has concluded, it’s time to analyze the data and draw conclusions.

This involves two key aspects:

Statistical significance:

Statistical significance is a measure of the likelihood that the observed differences between the tested variations are due to the variables being tested rather than random chance. To determine statistical significance, you will need to perform a statistical test, such as a t-test or chi-squared test, depending on the nature of your data.

Generally, a result is considered statistically significant if the probability of the observed difference occurring by chance (the p-value) is less than a predetermined threshold, often set at 0.05 or 5%. This means there is a 95% confidence level that the observed difference is due to the tested variables and not random chance.

Practical significance:

While statistical significance is crucial, it’s also essential to consider the practical significance of your results. This refers to the real-world impact of the observed differences on your marketing objectives and business goals.

To assess practical significance, consider the effect size of the observed difference (e.g., the percentage increase in email open rates) and the potential return on investment (ROI) of implementing the winning variation. This will help you determine whether the experiment results are worth acting upon and inform your marketing decisions moving forward.

A systematic approach to designing growth marketing experiments helps you to design, execute, and analyze your experiment effectively, ultimately leading to better marketing outcomes and business growth.

Examples of Successful Marketing Experiments

In this section, we will explore three fictional case studies of successful marketing experiments that led to improved marketing outcomes. These examples will demonstrate the practical application of marketing experiments across different channels and provide valuable lessons that can be applied to your own marketing efforts.

Example 1: Redesigning a website for increased conversions

AcmeWidgets, an online store selling innovative widgets, noticed that its website conversion rate had plateaued.

They conducted a marketing experiment to test whether a redesigned landing page could improve conversions. They hypothesized that a more visually appealing and user-friendly design would increase conversion rates by 15%.

AcmeWidgets used A/B testing to compare their existing landing page (the control) with a new, redesigned version (the treatment). They randomly assigned website visitors to one of the two landing pages. They tracked conversions over a period of four weeks.

At the end of the experiment, AcmeWidgets found that the redesigned landing page had a conversion rate 18% higher than the control. The results were statistically significant, and the company decided to implement the new design across its entire website.

As a result, AcmeWidgets experienced a substantial increase in sales and revenue.

Example 2: Optimizing email marketing campaigns

EcoTravel, a sustainable travel agency, wanted to improve the open rates of their monthly newsletter. They hypothesized that adding a sense of urgency to the subject line would increase open rates by 10%.

To test this hypothesis, EcoTravel used A/B testing to compare two different subject lines for their newsletter:

• “Discover the world’s most beautiful eco-friendly destinations” (control)
• “Last chance to book: Explore the world’s most beautiful eco-friendly destinations” (treatment)

EcoTravel sent the newsletter to a random sample of their subscribers. Half received the control subject line, and the other half received the treatment. They then tracked the open rates for both groups over one week.

The results of the experiment showed that the treatment subject line, which included a sense of urgency, led to a 12% increase in open rates compared to the control.

Based on these findings, EcoTravel incorporated a sense of urgency in their future email subject lines to boost newsletter engagement.

Example 3: Improving social media ad performance

FitFuel, a meal delivery service for fitness enthusiasts, was looking to improve its Facebook ad campaign’s click-through rate (CTR). They hypothesized that using an image of a satisfied customer enjoying a FitFuel meal would increase CTR by 8% compared to their current ad featuring a meal image alone.

FitFuel conducted an A/B test on their Facebook ad campaign, comparing the performance of the control ad (meal image only) with the treatment ad (customer enjoying a meal). They targeted a similar audience with both ad variations and measured the CTR over two weeks.
The experiment revealed that the treatment ad, featuring the customer enjoying a meal, led to a 10% increase in CTR compared to the control ad. FitFuel decided to update its

Facebook ad campaign with the new image, resulting in a more cost-effective campaign and higher return on investment.

Lessons learned from these examples

These fictional examples of successful marketing experiments highlight several key takeaways:

• Clearly defined objectives and hypotheses: In each example, the companies had specific marketing objectives and well-formulated hypotheses, which helped guide their experiments and ensure relevant and actionable results.
• Proper experimental design: Each company used the appropriate testing method for their experiment and carefully controlled variables, ensuring accurate and reliable results.
• Data-driven decision-making: The companies analyzed the data from their experiments to make informed decisions about implementing changes to their marketing strategies, ultimately leading to improved outcomes.
• Continuous improvement: These examples demonstrate that marketing experiments can improve marketing efforts continuously. By regularly conducting experiments and applying the lessons learned, businesses can optimize their marketing strategies and stay ahead of the competition.
• Relevance across channels: Marketing experiments can be applied across various marketing channels, such as website design, email campaigns, and social media advertising. Regardless of the channel, the principles of marketing experimentation remain the same, making them a valuable tool for marketers in diverse industries.

By learning from these fictional examples and applying the principles of marketing experimentation to your own marketing efforts, you can unlock valuable insights, optimize your marketing strategies, and achieve better results for your business.

Common Pitfalls of Marketing Experiments and How to Avoid Them

Conducting marketing experiments can be a powerful way to optimize your marketing strategies and drive better results.

However, it’s important to be aware of common pitfalls that can undermine the effectiveness of your experiments. In this section, we will discuss some of these pitfalls and provide tips on how to avoid them.

Insufficient sample size

An insufficient sample size can lead to unreliable results and limit the generalizability of your findings. When your sample size is too small, you run the risk of not detecting meaningful differences between the tested variations or incorrectly attributing the observed differences to random chance.

To avoid this pitfall, calculate the required sample size for your experiment based on factors such as the expected effect size, the desired level of confidence, and the type of statistical test you will use.

In general, larger sample sizes provide more reliable and accurate results but may require more resources to conduct the experiment. Consider adjusting your experimental design or testing methods to accommodate a larger sample size if necessary.

Lack of clear objectives

Your marketing experiment may not provide meaningful or actionable insights without clear objectives. Unclear objectives can lead to poorly designed experiments, irrelevant variables, or difficulty interpreting the results.

To prevent this issue, establish specific, measurable, achievable, relevant, and time-bound (SMART) objectives before starting your experiment. These objectives should guide your entire experiment, from hypothesis formulation to data analysis, and ensure that your findings are relevant and useful for your marketing efforts.

Confirmation bias

Confirmation bias occurs when you interpret the results of your experiment in a way that supports your pre-existing beliefs or expectations. This can lead to inaccurate conclusions and suboptimal marketing decisions.

To minimize confirmation bias, approach your experiments with an open mind and be willing to accept results that challenge your assumptions.

Additionally, involve multiple team members in the data analysis process to ensure diverse perspectives and reduce the risk of individual biases influencing the interpretation of the results.

Overlooking external factors

External factors, such as changes in market conditions, seasonal fluctuations, or competitor actions, can influence the results of your marketing experiment and potentially confound your findings. Ignoring these factors may lead to inaccurate conclusions about the effectiveness of your marketing strategies.

To account for external factors, carefully control for potential confounding variables during the experimental design process. This might involve using random assignment, testing during stable periods, or controlling for known external influences.

Consider running follow-up experiments or analyzing historical data to confirm your findings and rule out the impact of external factors.

Tips for avoiding these pitfalls

By being aware of these common pitfalls and following best practices, you can ensure the success of your marketing experiments and obtain valuable insights for your marketing efforts. Here are some tips to help you avoid these pitfalls:

• Plan your experiment carefully: Invest time in the planning stage to establish clear objectives, calculate an adequate sample size, and design a robust experiment that controls for potential confounding factors.
• Use a hypothesis-driven approach: Formulate a specific, testable hypothesis based on existing knowledge or data to guide your experiment and focus on the most relevant variables and outcomes.
• Monitor your experiment closely: Regularly check the progress of your experiment, address any issues that arise, and ensure that your experiment is running smoothly and according to plan.
• Analyze your data objectively: Use statistical techniques to determine the significance of your results and consider the practical implications of your findings before making marketing decisions.
• Learn from your experiments: Apply the lessons learned from your experiments to continuously improve your marketing strategies and stay ahead of the competition.

By avoiding these common pitfalls and following best practices, you can increase the effectiveness of your marketing experiments, gain valuable insights into customer preferences and behaviors, and ultimately drive better results for your business.

Building a Culture of Experimentation

To truly reap the benefits of marketing experiments, it’s essential to build a culture of experimentation within your organization. This means fostering an environment where curiosity, learning, data-driven decision-making, and collaboration are valued and encouraged.

Encouraging curiosity and learning within your organization

Cultivating curiosity and learning starts with leadership. Encourage your team to ask questions, explore new ideas, and embrace a growth mindset.

Promote ongoing learning by providing resources, such as training programs, workshops, or access to industry events, that help your team stay up-to-date with the latest marketing trends and techniques.

Create a safe environment where employees feel comfortable sharing their ideas and taking calculated risks. Emphasize the importance of learning from both successes and failures and treat every experiment as an opportunity to grow and improve.

Adopting a data-driven mindset

A data-driven mindset is crucial for successful marketing experimentation. Encourage your team to make decisions based on data rather than relying on intuition or guesswork. This means analyzing the results of your experiments objectively, using statistical techniques to determine the significance of your findings, and considering the practical implications of your results before making marketing decisions.

To foster a data-driven culture, invest in the necessary tools and technologies to collect, analyze, and visualize data effectively. Train your team on how to use these tools and interpret the data to make informed marketing decisions.

Regularly review your data-driven efforts and adjust your strategies as needed to continuously improve and optimize your marketing efforts.

Integrating experimentation into your marketing strategy

Establish a systematic approach to conducting marketing experiments to fully integrate experimentation into your marketing strategy. This might involve setting up a dedicated team or working group responsible for planning, executing, and analyzing experiments or incorporating experimentation as a standard part of your marketing processes.

Create a roadmap for your marketing experiments that outlines each project’s objectives, hypotheses, and experimental designs. Monitor the progress of your experiments and adjust your roadmap as needed based on the results and lessons learned.

Ensure that your marketing team has the necessary resources, such as time, budget, and tools, to conduct experiments effectively. Set clear expectations for the role of experimentation in your marketing efforts and emphasize its importance in driving better results and continuous improvement.

Collaborating across teams for a holistic approach

Marketing experiments often involve multiple teams within an organization, such as design, product, sales, and customer support. Encourage cross-functional collaboration to ensure a holistic approach to experimentation and leverage each team’s unique insights and expertise.

Establish clear communication channels and processes for sharing information and results from your experiments. This might involve regular meetings, shared documentation, or internal presentations to keep all stakeholders informed and engaged.

Collaboration also extends beyond your organization. Connect with other marketing professionals, industry experts, and thought leaders to learn from their experiences, share your own insights, and stay informed about the latest trends and best practices in marketing experimentation.

By building a culture of experimentation within your organization, you can unlock valuable insights, optimize your marketing strategies, and drive better results for your business.

Encourage curiosity and learning, adopt a data-driven mindset, integrate experimentation into your marketing strategy, and collaborate across teams to create a strong foundation for marketing success.

In the world of marketing, your budget is the fuel that powers your business efforts, allowing you to reach new audiences and accomplish your goals. If your marketing budget is well-planned and executed, it gives you the resources to tackle any challenge thrown your way.

But before you start allocating funds, it’s essential to answer two crucial questions: What are you going to spend money on, and why?

Even if these questions sound simple, they make the difference between a thriving marketing campaign and a failed one.

In this article, we’ll explain what a marketing budget is, share average marketing budgets for startups and small businesses, and provide marketing budget examples to demonstrate how to calculate it easily. Plus, you’ll get useful tips for your marketing budget allocation.

Ready? Let’s explore all the essential aspects of your marketing budget management.

What is a marketing budget?

A marketing budget refers to the amount of money you aside to cover all your marketing expenses. This includes expenses related to advertising, promotion, public relations, market research, branding, and other marketing activities.

The marketing budget is an important tool to design and execute effective marketing campaigns and achieve your marketing objectives. What’s more, it allows you to keep your marketing efforts aligned with the overall business strategy.

How to calculate your marketing budget? 5 easy steps to marketing budget management.

Marketing budget management involves the process of planning, tracking, and optimizing expenses. Obviously, this ensures that you use the allocated budget effectively and efficiently to achieve your marketing goals.

The latest findings from the CMO Survey’s 29th edition reveal that in 2022, companies allocated a record-breaking 13.8% of their total budget to marketing. While this figure can serve as a useful benchmark for a marketing budget example, calculating the marketing budget can vary depending on the size of your business, the industry, the target market, and the marketing goals. Regardless of the factors involved, here are five essential steps how to calculate your marketing budget:

Step 1: Determine your overall revenue goal.

Looking for ways to avoid overspending or underspending? Well, before you can calculate your marketing budget, you should get clear about the overall revenue goal.

To clarify, your revenue goal represents the amount of money you expect to earn during a specific period. It helps you understand the amount of revenue you need to generate to cover expenses and make a profit.

By setting a revenue goal, you can then determine how much to spend on marketing. And this immediately calls for considering factors such as the cost of acquiring new customers, retaining existing ones, and promoting your brand.

Let’s get specific. Suppose your marketing team aims to acquire 300 new customers within a set timeframe. In this case, the essential question is: “What is the required budget to acquire 300 new customers?”

To determine this, you must first identify the cost of acquiring one new customer. This figure is calculated using two essential metrics: cost per lead and conversion rate. By examining these data points, you can identify the precise amount to invest in your marketing efforts.

Which leads us to step number two.

Step 2: Calculate the cost per lead.

The cost per lead (CPL) is a straightforward and effective metric that indicates the marketing budget required to generate a new lead. CPL is an important number on your marketing budget calculator as it can provide valuable insights into the effectiveness of your efforts.

To determine your CPL, simply divide your total marketing expenses by the number of leads you have obtained.

Total marketing budget ÷ Number of new leads = Cost per lead

For instance, let’s say you spend $1,000 on social media marketing, $1,500 on email marketing, and $5,000 on promotional brand events to acquire new leads. This means your total spend for marketing equals $7,500 ($1,000 + $1,500 + $5,000). Suppose you acquired 100 leads after spending this budget. Thus, your cost per lead is $75 (7,500 ÷ 100 = 75).

This formula is also helpful to calculate the CPL for each of your marketing channels. Eventually, it enables you to make informed decisions on how to distribute your marketing budget across channels, depending on which ones yield the most cost-effective leads.

To put it in context, suppose you run an e-commerce business and want to measure the effectiveness of your email marketing campaign. You spend $2,000 on email marketing in a month and generate 20 leads as a result. To calculate your CPL, divide your marketing spend by the number of leads ($2,000÷20), which gives you a cost per lead of $100.

By monitoring your CPL over time, you can determine whether your email marketing campaign is becoming more or less cost-effective. And as a result, adjust your strategy accordingly. For instance, if you find that your CPL is steadily increasing, you may need to refine your targeting or messaging to boost the performance of your campaign. Alternatively, if your CPL is decreasing, you may want to allocate more resources and capitalize on the campaign’s cost-effectiveness.

Step 3: Calculate your conversion rate.

Simply generating leads isn’t enough. Your ultimate target is to convert them into paying customers to achieve your business goals.

Calculate your conversion rate by dividing the number of sales by the number of leads you have generated.

Total number of conversions ÷ Total number of leads X 100% = Conversion rate

For instance, if you generated 500 leads and converted 10 into customers, your average conversion rate is 5% (10 customers/500 leads X 100% = 5%).

If you don’t calculate the average conversion rate for your company, setting up your marketing budget may prove challenging. Why? Because without such data, you may be wasting resources on ineffective marketing strategies.

After determining your cost per lead and conversion rate, you can finalize calculating your marketing budget.

Step 4: Determine how many leads you need.

To reach your new customer goal, you need to determine the number of leads your company requires. You can know this number by dividing your new customer goal by your average conversion rate. This approach provides a clear picture of how many leads your company needs to reach its new customer goal. Here’s the formula:

The number of your new customer goal ÷ The average conversion rate = The number of leads you will need.

So, 30 new customers ÷ 2% x 100 = 1500 leads

This means that if your average conversion rate is 2%, you’ll need to generate at least 1500 new leads in order to hit your target of 30 new customers.

Step 5: Monitor and track expenses.

Regularly track and analyze your marketing spend to ensure that you’re staying within budget and maximizing ROI. Monitor your campaigns’ performance and make necessary adjustments to your budget allocation to optimize results. Without a doubt, you should allocate more funds towards high-performing channels and decrease spending on low-performing channels.

Budget considerations for startups and small businesses: 10 essential items to go into your list.

Now that you’ve learnt how to calculate a marketing budget, we can look into the marketing budget categories.

So, what’s in a marketer’s budget?

A variety of expenses should go into your marketing budget breakdown to reflect the unique needs and goals of your business:

1. Branding and design: Creating a logo, designing marketing materials, and developing a brand identity.
2. Website development: Building a website, hosting fees, and ongoing maintenance and updates.
3. Content creation: Creating blog posts, social media content, and other marketing materials.
4. Advertising: Paid social media ads, Google AdWords, and other forms of online advertising.
5. Public relations: Establishing connections with journalists and media outlets and producing press releases and other materials for the media.
6. Events: Attending trade shows, hosting events, and other forms of in-person marketing.
7. Marketing technology: Leveraging marketing technology such as automation tools, customer relationship management (CRM) software, email marketing software, and project management tools to achieve marketing goals.
8. Employee salaries, benefits, and training: Paying your marketing team, if you have one, and providing benefits such as health insurance and retirement plans. Plus, investing in the team’s continuous development and growth.
9. Research and analysis: Conducting market research, analyzing customer data, and tracking the health of your marketing campaigns.
10. Unexpected costs: For example, a sudden change in market conditions or a new competitor entering the market may require a shift in marketing strategy. You may even need additional marketing spending to stay competitive. That’s why it’s important to have some flexibility in the budget to accommodate these unexpected costs and changes. One way to plan for unexpected costs is to set aside a contingency fund within the marketing budget. This fund can be used to cover unforeseen expenses or to invest in new marketing opportunities that may arise.

Marketing budget allocation best practices

Next, we’ve handpicked marketing budget allocation tips and strategies to help you navigate this challenging process more easily. Follow these tips to enhance the impact of your marketing budget and achieve your business goals more efficiently.

Prioritize your channels.

Who is your target audience? What are your business objectives? Answer these questions to be able to prioritize your marketing channels. Focus on the channels that offer the best potential to reach your target audience and drive the desired results.

Consider your customer journey.

Wondering how to allocate your marketing budget effectively? Consider the various stages a potential customer goes through before making a purchase, including awareness, consideration, decision, and post-purchase evaluation. For example, you may allocate more funds towards acquisition tactics at the top of the funnel. Alternatively, if you want to build loyalty, you may concentrate on retention tactics at the bottom of the funnel.

Plan for contingencies.

Allocate a portion of your budget towards unforeseen circumstances and unexpected expenses. This is your lifeboat to ensure that you have the resources to pivot your marketing strategy if needed.

Use technology to simplify budget management.

Technology isn’t going anywhere. It’s becoming more and more integrated in our daily lives, marketing budgets are following suit, with more and more resources being channeled towards digital efforts.

Investing in marketing technology, such as a marketing automation tool, can be a game-changer. It can help you determine attribution, cost per lead, and conversion rates, as well as generate and nurture leads. By the way, you can also utilize marketing budget management software to automate tracking, enhance analysis and improve overall efficiency. What’s more, a versatile project management tool such as Teamly can help to improve team communication and streamline work processes.

Make digital advertising your first choice.

Note that traditional advertising, such as TV and radio ads and billboards, can be more expensive than digital advertising. Therefore, they may not be effective for startups and small businesses trying to reach a more targeted audience.

Be flexible.

Remember, the marketing budget is not a fixed number. It can be adjusted depending on the performance of your marketing efforts and the needs of your business. Be prepared to adjust your budget allocation based on changing business conditions, emerging trends, and other factors.

Startups vs. small businesses: Is the marketing budget different for them?

Marketing budget allocation for small businesses and startups can differ in several ways, primarily due to differences in resources, goals, and target markets.

Small businesses may have more established customer bases and a clearer understanding of their target markets. Therefore, a small business marketing budget may focus on retaining customers and building loyalty through customer engagement, referrals, and personalized marketing efforts.

In contrast, startups may have limited resources and may be looking to establish themselves in a new market. So, a startup marketing budget allocation may be geared towards acquiring new customers through awareness-building and lead-generation tactics.

An average marketing budget for small businesses.

Small businesses typically allocate around 7-8% of their total revenue to marketing efforts.

An average marketing budget for startups.

Startups should allocate 10-11% of their overall revenue towards marketing efforts.

Here’s a startup marketing budget example. If a startup has an annual revenue of $500,000, its marketing budget would typically range between $50,000 to $55,000 to be able to establish brand awareness and attract customers.

Pro tip: Consider the industry in which your business operates

One factor that can greatly impact your marketing budget is the industry in which your business operates. B2B companies are advised to allocate a marketing budget between 2% and 5% of their revenue. However, for B2C companies, the recommended proportion is typically higher, ranging from 5% to 10%. This is because B2C businesses often require a larger investment in marketing channels, such as social media, influencer marketing, and other forms of advertising, in order to effectively target various customer segments.

A marketing budget example for small businesses and startups

Here’s an example of a marketing budget breakdown:

Total marketing budget: $50,000

1. Inbound content marketing: $12,500 (25% of the total marketing budget)
   • Includes blog content creation, social media management, and SEO
2. Paid advertising: $15,000 (30% of total budget)
   • Includes Google Ads and social media advertising
3. Email marketing: $5,000 (10% of total budget)
   • Includes email newsletter creation and distribution
4. Events and sponsorships: $7,500 (15% of total budget)
   • Includes trade shows, conferences, and community events
5. Traditional advertising: $5,000 (10% of total budget)
   • Includes print ads and local radio spots
6. Contingency fund: $5,000 (10% of total budget)
   • Set aside for unexpected costs or opportunities that may arise throughout the year.

Of course, the specific allocation of a marketing budget will vary depending on the business’s goals, target audience, and industry. This is just a single example to give you an idea of how a small business might divide up its marketing budget.

Marketing budget allocation: Why one size doesn’t fit all

Start looking into the topic of allocating a marketing budget, and you’ll see that examples are ample. In fact, businesses take a wide variety of approaches.

Some companies, like Casper, invest heavily in marketing and sales, allocating as much as 43% of their revenue to these efforts. Others, like Kohl’s, take a more conservative approach, spending only 4.9% of their revenue on marketing. Under Armour, falls somewhere in the middle, dedicating 10.5% of its revenue to marketing.

But what does it all mean? Your choices will vary widely depending on the company and the industry you operate in.

Direct-to-consumer brands, for example, often require a larger investment in marketing to build brand awareness and reach new customers. However, even within this category, there is significant diversity in marketing spend. While Casper spends a high proportion of its revenue on marketing, numbers are different for other e-commerce companies. Stitch Fix, for example, allocates only 3% of its revenue to marketing.

This illustrates that there is no one-size-fits-all approach to allocating marketing budgets. Instead, companies must carefully consider their specific industry, business goals, and target audience when determining their marketing budgets.

One factor that contributes to the diversity of marketing budget examples is the increasing importance of digital marketing channels. Look around. With the rise of social media and other digital platforms, businesses have more options than ever before for reaching their target audience. However, this also means that companies must be strategic in their approach to digital marketing. They should carefully select the channels that are most effective for their business.