question
Looking at the full spectrum of advertising mediums available, from traditional print and radio to newer sponsored social media posts, it can be a little overwhelming to decide where to spend our marketing dollars. Do you have a favorite low-cost marketing idea for companies on a limited budget?
Jake Cain
Long Tail Pro
longtailpro.com
answer:
In your question you make a common leap in logic from: "Wow, there's a lot of advertising to choose from," to "What's the cheapest marketing option?" Advertising is one kind of marketing tactic, and potentially very different from a "marketing idea" or new tactic. So let's focus on value and return on the investment of your marketing dollars instead.
First, what are you trying to accomplish with your marketing? Is it just about awareness, or is it attempting to generate leads for the sales staff? In any case, you need to decide who the target is, and seriously consider the value of that potential customer.
If your average client stays with you for four years and spends $100,000 in that time, you can look at your average margins and estimate how much profit a single new customer represents.
If 25 percent of your new leads turn into active clients, even if your net profit is only 5 percent (in software I hope it's much higher than that) in the lifetime of a customer, each lead represents $1,250 (0.25 x 0.05 x $100,000) in profit. Now ask yourself how much is a lead worth to you? Let's say 20 percent of the net profit — that's $250 ($5 for every marketing dollar spent).
At this point, your question should be changing from interest in the "low-cost" option to the high-yield opportunity. You can spend $500 on a package of online ads that generate one lead, or $1,000 on highly targeted direct mail that generates a few more. Depending on how you target, maybe you can increase the lifetime value of average leads by aiming directly for firms that look like your best customer rather than your average customer.
About the author
Mike Porter, Ed.D. is director of the Master of Business Communication Program at the University of St. Thomas Opus College of Business
