I’m regularly asked how much business owners should spend on marketing. Fair enough. We want to know what’s reasonable to invest and what we should expect from our marketing spend.

But there’s a better question – a question that will give you a much more accurate and, ultimately, more successful result.

It’s understandable that people want to predict the future before they decide whether or not to invest in a particular marketing technique, tool or strategy. It’s very human to want to mitigate risk.

But although we can estimate the likely results of a particular marketing campaign, chance and randomness is omnipresent, alongside the fickleness of human psychology.

Asking the person who is going to be taking your marketing dollars about the likely outcome of a campaign is also fraught, because this person is vested in getting you to proceed, so they’ll say what they think you want to hear.

Typically, large marketing agencies will have sales people who promise things to the client that the creative and technical team can’t deliver. They figure they’ll be able to demonstrate other positive outcomes of the campaign, or the client will forget the details of what was promised.

If you’re serious about marketing, it’s important that you take charge of measuring marketing campaign results, because external marketing, digital, advertising or PR agencies will likely skew the results to put their own positive spin on things.

What to do?

The better question to ask

The better question to ask – which is after the marketing dollars are spent – is what is the return on investment?

To know the return on investment, you need to have a good grasp of your key business numbers.

The two key metrics you need to know before you start investing serious coin on marketing, are:

  • The profit market of your offering
  • The average lifetime spend of your clients

Let’s say you have an introductory package that you’re advertising. It costs $99 to buy and your profit is $30. If you spend less than $30 per lead on digital marketing and advertising, and your lifetime spend per client is much higher than that initial $99 spend, then you’re laughing. If, on the other hand, your digital leads are costing you more than $30, then you’re making no profit.

You may still choose to go ahead with your marketing campaign, but you need to measure and know that you can convert a significant percentage of those introductory clients into long-term clients who go on to spend more with your business.

These two figures – your profit per offering and average lifetime spend per client – are your parameters within which to approach your marketing spend.

Everything is an experiment

Typically new clients look nervous when I say that everything in marketing and business is an experiment. They may believe this is a risky approach.

But the nature of modern marketing, and especially the digital arena, is change. There’s been a significant shift in how marketing works in the last 20 years, and it requires a different approach – one that’s collaborative, transparent, open, empathetic, flexible and trustworthy. All good things, surely.

Most of us prefer certainty to change, especially when we’re spending money on what we hope will be a smart decision. Nobody wants to have buyer’s remorse. We would prefer things in business to be predicable. But that’s just not reality.

Failure isn’t the problem; it’s being unprepared for success

For businesses that accept the marketing is an experiment and dive in, measuring their return, taking advice from marketing experts, and tweaking and adjusting to improve their results, there’s a very different problem than wasting money.

For those of us knee-deep in Facebook ads, Google AdWords and other digital marketing endeavours, the potential problem is that the business model isn’t set up to handle a big influx of new leads and clients.

For many businesses, it’s the lack of systems, support staff and other resources that make it untenable to scale, not the failure of their marketing.

Leads come in too quickly to be handled properly by the business. Systems aren’t as robust as they should be. Staff become overworked, overwhelmed and leave. The business owner gets stressed and starts making bad decisions because they’re not getting enough rest and thought space to think strategically.

For all the talk about “scale” in tech start-ups, there aren’t that many businesses that can scale quickly and easily, including technology companies. Even technology companies still have the pesky problem of people, who have the audacity to need such things as training, support, rapport and engagement, a positive work culture and peer mentoring.

What are your alternatives?

For those businesses that aren’t operating at capacity, that may still be hesitant or averse to spending money on online advertising, ask yourself what are your alternatives?

You can (and should) still be doing business blogging, social media marketing and email marketing. But if these aren’t bringing new clients through the door, what else could you be doing?

Any marketing endeavor takes time and energy. And these things are in short supply. While activities such as social media marketing may appear free, that’s time you’re spending, that may be better spent servicing your paying clients, picking up the phone, or crafting a pitch for a dream client.

Ultimately, you need both the creative, empathetic, memorable marketing that stands for something and helps your business define its difference in the market. But you also need the online advertising to bring the steady stream of leads that you can convert into happy new clients.

Business planning

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