Am I spending too much on my marketing?
Whilst this is the question people ask, it is not quite the one they mean. Money invested in marketing should always be circular, i.e. the more you pour in the more that will come back around.
You can NEVER spend too much on marketing, but you can spend it on the wrong marketing, so the question becomes: Are you spending your marketing budget poorly?
To work this out, we need to look at your marketing ROI (return on investment)
Working out marketing ROI
The first thing you will need is a robust tracking system. Ensure you have a way of tracking which leads are coming from where and how profitable they are. This can be done through google analytics or software like CANDDi.
You’ll then need to work out your ROI for each of your marketing streams. You will probably have:
- Social Media (this requires splitting down into each platform, Instagram, Twitter etc.)
- E-mail blasts and newsletters
- Your website
- Paid adverts
- Others specific to you
For each of your marketing streams there are a few calculations that you will want.
How to calculate cost per lead
(Gross profit–Sum of Investment) / Number of leads = Cost per lead
This tells you how much it is costing you to bring in an average lead (the lower the better)
How to calculate ROI
Gross profit / Sum of investment = Return on investment
This formula tells you how much of your investment is coming back as profit, as long as your return on investment is higher than your total costs, then you are safe. You want your ROI to be as high as possible.
Your marketing activities have different aims and should be treated as such. Split your campaigns in two, brand awareness and lead generation. Brand awareness campaigns may only boast small ROI’s on their own but should drive traffic towards lead generation. Remember, your total marketing budget should never equal or exceed the value of its returns.
Review your marketing streams
Once you have worked out your ROI’s you’ll easily spot which channels are producing the most leads and conversions and which are performing the worst. You can now make informed decisions about which to keep and which to alter. Keep in mind no one knows your marketing channels better than you, so don’t make rash decisions that you know are counter productive even if the ROI scores aren’t what you expected. A channel might have a low ROI despite bringing a lot of traffic to your website, in which case it isn’t the marketing stream that needs to change but the conversion process.
Look at the difference between your best performing marketing channel and your worst. Find what separates them, don’t delete a channel just because it performed badly for a week. Learn as much about your audience as you can from their habits and then change up your marketing accordingly.
Is there other marketing you should consider?
There is always more to be done with marketing, new channels to explore, new angles to see, and campaigns to run. You should always consider that there maybe other more efficient ways to do your marketing. If you are unsure, reach out to others in your sector or a marketing agency that can help build your marketing strategy.
Re-Balance and go again
Once you have analysed your results and made the necessary adjustments, it’s time to run the campaigns again. That question of ‘Am I spending too much on my marketing’ could apply here for those just starting up. Don’t spend massive capital on your marketing strategies if they are guesses. Build up a bank of information about which channels resonate best with your target market before slowly increasing the budget to expand your horizons.
This is not a once and done task. Your marketing department (that could just be you in a different hat) should review your marketing performance regularly. Maximising the amount of sales produced by your marketing campaigns requires constant changes and tweaks. This can be off-putting as it seems like a lot of work, but keeping records as you go is the key to keeping it simple.