14 Dec How The Big Marketing Players Structure Their Marketing Budget
How much should my marketing budget be? This is a question I get asked at least once a week by new clients. My response almost always catches them by surprise.
The beauty of using direct response marketing is that everything is quantifiable. Unlike brand/institutional style advertising, with direct response, return on investment (ROI) is easily trackable.
The savviest direct response marketers understand that the goal of front-end marketing is to acquire maximum new customers/clients at break-even. In other words, for every dollar we invest in front-end marketing our objective is to generate a dollar back (with the front-end initial transaction) in the form of a new customer/client.
Hence, if we invest $1,000.00 in front-end marketing, our aim is to acquire $1,000.00 (in initial transactions) of new customers/clients.
Understood in this context, that means the money we spend to acquire new clients/customers is not an expense at all. But, is an investment.
A true expense in your business is anything that doesn’t bring you a return on its cost. Things like utilities, for example, are an expense. But, marketing that brings you back every dollar you’ve invested in the form of an equal amount of new clients/customers is not an expense. Again, it’s an investment. And, it should be treated as such.
So, how should this impact what you allocate towards marketing dollars in your business?
Well, let me answer that with a question:
How often should an investor fund an investment that immediately returns their money AND gives them an asset that will generate more and more profit in the future?
The answer should be obvious – as often as they can.
The same holds true for an entrepreneur using direct response marketing to grow their business.
If, for every dollar you invest in marketing you get back a dollar in the form of a new customer, it makes no sense to arbitrarily set a limit on how many of those dollars you can invest. This is why the common approach to setting a marketing budget based on your revenue is not embraced by the biggest and savviest marketers.
Your goal, when investing in front-end customer acquisition should be to invest as much as you can. Not the least. The most.
All else being equal, the marketer who invests the most amount of money in the acquisition of new clients/customers will outgrow their competitors.
Let’s look at a quick hypothetical example (assuming two marketers are breaking-even on their front-end campaigns).
Marketer A invests $3,000 a month on customer acquisition.
Marketer B invests $9,000 a month on customer acquisition.
Marketer B generates three times the number of new clients/customers. And, even though they both broke-even on the front… Marketer B now has three times the number of clients/customers in their backend marketing funnel to generate profit from.
Hence, Marketer B wins!
For YOU…. your goal should be break-even on the front-end. Then re-invest those dollars into more new clients/customers as quickly and as often as possible.
Question: What are you using right now to track the return on investment from your front-end marketing? You can leave a comment by clicking here.