Latest / Financially Fabulous / The Campaign That Worked
Transcript
- Christyne Gray: Why a marketing report can be right and still not tell you whether you made money. A retailer turned her phone around during a call not that long ago before I even finished asking how her most recent biggest of the year launch had gone. On the screen was a screenshot from her ad platform, a campaign that had run the week before. And a return number sitting in bold at the top of the report, something close to twelve times what she'd spent, which seems very remarkable. She wasn't really asking me a question, she was actually showing me proof. Look at this, she said. Tell me this isn't working. On its own terms, that platform wasn't wrong. The campaign had done exactly What it was built to report, and the number at the top of that screen was accurate by whatever definition the platform uses to calculate it. I want to be honest about that because what I'm about to say isn't a case about marketing, And it isn't a case against the number that is existing. It's a case for asking a second question. Right alongside the first one, because whether a campaign worked is not the same question as whether it made the company any money. This is the Financially Fabulous podcast, and last time we sat with a hire that added a name to payroll without ever quite adding room underneath it. More hands carrying almost exactly the same weight. I told you at the end of that conversation that I wanted to look next at the money leaving the business for marketing and advertising because a campaign can generate real revenue, real sales. The report can look strong, and the owner can still not be sure whether the business actually made money from it. And is the business cash flowing? I want to spend this conversation exactly there. Because a report like the one on that phone from that very special client is almost never lying to you. It's just very rarely telling you the entire story, the whole story about your cash flow and your profitability. So here's what I've noticed: when an owner evaluates a campaign, the number she reaches. For first is almost always revenue because revenue is the number that platforms hold her accountable to. It's the number that platforms hand to her, calculated and formatted and sitting right at the top of the report before she has to go looking for anything else. And let's be honest, revenue for most of us is a vanity number. It feels really good to see that number on our screen. And we secretly hope that that number, or at least a strong percentage of it, will also show up in our bank account. That revenue number, it feels like the largest amount of proof to our success story. Money came in that wasn't there before. It's attached to a specific campaign and on a specific day. And that kind of clean cause and effect is rare enough in a retail business. That it's easy to want to stop the inquiry right there because it feels good. So we've talked in other conversations about the kind of relief that a discount, for example, produces. An order comes in, the bank balance ticks up a little bit, and it's tempting to treat that relief as resolution rather than simply relief. A strong-looking ad report. Tends to produce the same feeling. Something happened. It's attached to a number. And the number is bigger than what was spent to get there. That combination is genuinely satisfying. And I understand completely why an owner would want to call that proof and move on to the next big decision. I'd ask you to slow down there because revenue attributed to a campaign. And the contribution that campaign actually made to the business are two different numbers. And a healthy business needs to know both of them, not just the one that shows up first. Revenue tells you that a transaction happened and a platform is willing to take some credit for it. Contribution, on the other hand, tells you what was actually left. Once every real cost of that transaction is accounted for. We're talking about the product itself, whatever it cost to get into the customer's hand, your selling costs, your retail supplies, whatever discount was layered on to make the offer work, and the ad spend that produced the sale in the very first place. Revenue is what the platform wants you to see. Contribution is what the business actually keeps. So there's a second layer underneath that. And it's the one that I find owners have thought about the least. The revenue a platform attributes to a campaign is not the same as revenue that wouldn't have happened without it. Some portion of nearly every campaign's reported sales comes from customers who already knew your brand, who were already planning to buy from you. And who simply clicked the ad on their way to a purchase they were gonna likely make anyway. The platform still claims credit for that sale because claiming credit is part of what the platform is built to do. It doesn't mean the number is fabricated, it simply means that the number is telling you what happened, not necessarily what the campaign caused. So this is where the discount conversation we had a few episodes ago comes back into full picture because a lot of paid campaigns aren't just spend against full price product. They're built around a promo code, a percentage off, a free shipping threshold, some incentive layered on top of the ad itself to make the offer irresistible enough to earn the click. When that's the case, the campaign is carrying two costs at once. What it costs to buy the attention of that customer and what it costs to close the sale once the attention arrived. A report that only shows revenue against ad spend is quietly leaving that second cost out of the math entirely. So a revenue number attached to a campaign without asking. What it cost to produce or what was actually left over once it was produced is a vanity number wearing a more sophisticated costume than most. It has a chart. It has a return on ad spend calculation sitting next to it that looks like real financial analysis. But a financially intelligent leader isn't only asking whether the campaign generated revenue. She is asking whether it generated profit the business actually gets to keep after the product, after the fulfillment, after the discount, and the ad spend itself have all had their turn. So this matters beyond any single campaign because every dollar spent on marketing that isn't truly contributing to a dollar that isn't available for anyone else the business is trying to build. Your own pay, maybe even a cash reserve that helps you sleep at night. How about next season's inventory investment or even simply room to breathe between now and the next big decision? Marketing evaluated purely on whether it worked can quietly become one of the largest expenses in the business, growing every year because the revenue number keeps climbing. While the actual contribution to profit stays flat or even shrinks underneath it. So here's what I would invite you to do this week. Pick one recent campaign, ideally one that you'd actually call a win, one that you've already been celebrating. Pull the revenue the platform attributed to it, and then sit down and subtract what it actually cost to deliver that revenue. The cost of goods sold that were sold, whatever it costs to fulfill and ship those orders, any discount or promo code that was part of that offer, and the ad spend itself. What's left is the campaign's real contribution. And it's worth comparing that number honestly to the one on the screen that made you want to run the campaign again. Then bring one question to whoever manages your marketing. Whether that's in-house ads team or an outside agency, ask them to show you contribution alongside return on ad spend, not instead of it, and ask them to separate revenue from new customers out from revenue attributed to customers who were already buying from you in the past. If that distinction isn't something that they currently track and that's not a failure on their part or on your part. It's simply a sign that the relationship has been built to report that marketing worked, not to help you decide whether it is paid. And what did that marketing pay in your business? Is it productive advertising? so this is a short episode, but it truly gives you a lot to think about. And next time I want to look at a different number that solves a very real problem as well, without ever quite resolving that problem. And it is the credit line or the loan that covers a gap that the business keeps reopening every month. Yes, we are gonna talk about debt. I want to spend real time with the difference between debt that's building something and debt that's simply financing the same shortfall. A little further down the road. I am Christyne Gray and thank you for being here and I will meet you right back here for the next episode.