The Case of the Missing $718,000

10am, Tuesday morning. All done reviewing marketing campaigns, and everything is looking good. Enjoying a smooth cappuccino from my latest indulgence—a professional grade espresso machine that steams the milk like an Italian Barista. I need a new challenge, a new marketing mystery to get my juices flowing…

Robin, my assistant, buzzed me. She frees my life from the mundane, so I can focus on the interesting stuff. “Hey, someone’s here to see you,” she said. “Looks like he needs help.”

There was a knock at the door of my office, loud and sharp — the knock of a desperate man.

His name was Jeff, the owner of a small digital agency. He was behind the eight ball, in real trouble. Jeff had a marketing mystery that if left unsolved would result in his company’s loss of an important client.

“Everything was going great,” Jeff said. “Our work was good, the client was happy with us. Then we had our yearly review meeting.”

“And what happened?”

“They said they weren’t seeing enough of an ROI to justify spending the same amount of money again next year,” Jeff stammered. “We’re a small marketing firm, we can’t afford to lose a client of this size.”

I nodded. His Digital Agency was in big time trouble. Jeff needed more information to justify his fees to his client. Perhaps we could find what was missing.

“Will you take our case?”

“Yes,” I said.

“Thank you!” Jeff sighed in relief, and sat back in the chair. He pulled out a pack of smokes from his jacket pocket. “May I?”

“No.”

It appears we have a case of an incomplete marketing data!

Let’s dig into this case and see if we can solve this marketing mystery…

The case file:

Jeff’s firm built a website for his client and promoted it on a budget of around $30,000 for the year. $195,312.91 is the amount of E-commerce sales Jeff’s client’s website did in one year. When the review came, the client evaluated his budget for the next year, and even though the sales looked decent, he said, “With only $200,000 in sales, I can’t justify spending $30,000 next year.”

Here are the facts:

  • E-commerce sales for the year were $195,000.
  • Based on a 40% gross profit, calculated, comes to a gross profit of $78,125 from E-commerce sales.
  • Jeff’s marketing fees are $30,000, meaning that he’d be taking almost 50% of their gross profit.

Assumed Percentage of Marketing Fees

No wonder Jeff’s client thinks he can’t afford to rehire him! But let’s dig in a little deeper. Now the real investigation begins…

Investigation:

After the initial investigation, we discovered something interesting: Jeff’s marketing fees were being evaluated against only a portion of the total sales — E-commerce sales. Online sales are easily tracked and reported; it’s black and white. But there were other types of sales that were happening: sales from web forms, phone calls, quotes, and emails. These types of sales are more difficult to track, because some of them have a longer sales cycle.

We dug in even deeper.

Prior to the website, Jeff’s client’s only sales came from their local state, California. That meant that all sales coming from outside of California could be attributed to the website. After identifying all the sales originating from their website, including those outside the client’s state, we discovered that the website had actually generated $972,000 in total sales. That’s a lot of cabbage!

Case Results:

  • E-commerce sales for the year: $195,000
  • Total website generated sales for the year $972,000, including E-commerce sales
  • Based on a 40% gross profit, calculated, comes out to a gross profit of $388,800 from total website sales
  • Jeff’s marketing fees are $30,000, taking about only 8% of the gross profit

With the new information we now know that the client grossed $388,800, instead of $78,125. That’s a 5x difference!

Actual Percentage of Marketing Fees

Case Solved: We found the missing $718,000, and Jeff kept his client.

“I can’t thank you enough,” Jeff said.

“WhatConverts is here to provide the complete marketing picture,” I told him. “We hunt down sales, track website traffic sources to leads, quotable leads, quotes, and final sales, so your clients can make better marketing decisions. Our obsession is your solution.”

“No agency should get short-changed ever again.”

Solve your own marketing mystery. Get started, it’s free.

Just before he left, Jeff turned back. “Hey, would you be interested in another marketing mystery? A family friend of mine has his own company, and he’s had enough of his marketing team constantly pushing for more money — it’s become toxic!”

“Sounds like my type of case” I said. “Let’s take a look…”

Check out the next case, Ending The Paid vs. Organic Search Debate.

Michael Cooney
Michael Cooney

Michael Cooney is a co-founder of WhatConverts. He’s been solving everyday marketing mysteries for years! Connect with him on Twitter or via email at michael@whatconverts.com.

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