How to turn your marketing from an expense into an investment

Often the first thing that business owners do when business becomes tough is to reduce or cut their marketing. We have learnt to do the exact opposite! If our business goes through a lean period, we immediately ramp up our marketing because we have turned our marketing from an expense into an investment. What’s the difference you may ask? Well, an expense is an outflow of money never to be seen again whereas an investment yields a return.

When you have successfully made the transition from an expense to investment, you have effectively created an unlimited marketing budget. If you knew that for every R 5,000 you spent on marketing resulted in signing up a new customer who generated R 15,000 in gross profit, you would want to spend as many R 5,000’s as you could because each marketing investment would bring you a new customer. It takes time to achieve this and it can only happen when you accurately test and measure your marketing campaigns. Test each of the different campaigns and strategies with different mediums, headlines, call-to-actions etc. and accurately measure the results of each campaign or strategy. By testing and measuring each campaign you will be able to then dump or tweak the campaigns or strategies that are not working and keep running with the ones that are working.

We tested a new campaign in our business earlier in the year which cost us R 10,000 to run. We yielded R 90,000 worth of new business from this particular campaign. Will we be running this campaign again? Absolutely!

I often get asked by business owners how much money they should spend on marketing and this all depends on how much business they would like to acquire. Once you know your acquisition cost per customer, you then multiply this by the number of clients you want to acquire and that will give you your ideal marketing spend. A quick way to calculate your acquisition cost is to take your last 12 months of marketing spend and divide by the number of new clients you acquired. I did this exercise for my business and the result for the 2019 calendar year was an acquisition cost of R 10,000 per customer. If I want to get two new clients per month, then I need to spend R 20,000 per month. Ideally, you want to calculate your acquisition cost per marketing strategy and then run with the strategies that give you the lowest acquisition cost. For example, we have one marketing strategy that leads to an acquisition cost of R 3,500 per customer, much lower than our average of R 10,000 per customer but this particular strategy is very labour intensive and is not possible to run as often as we’d like.

So in summary, key things for you to do:

  • Implement a Test and Measure system for all your marketing
  • Identify the strategies that are bringing in the leads
  • Tweak or dump the strategies that are not working
  • Ensure that the new business acquired brings in more gross profit than the marketing cost spent
  • Work hard to drive this acquisition cost down as much as you can

Darryn Le Grange, ActionCOACH Business Coach

Photo by Carl Heyerdahl on Unsplash