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Reference Desk
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Is Your Advertising Budget All Wrong??
One of the most common
questions for someone new in business, or at least new to marketing, is
how much to spend on advertising. But be careful because that is a
trick question.
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I'm often asked how much
should a person budget for advertising each month.
My answer is "that's the wrong question".
The right question is "how much should you spend to get a
customer?".
For instance, if you can regularly get a customer worth $3,000 in
revenue by spending an average of, say $250 on advertising and
follow-up, how many $250 do you want to spend.
As many as possible, right?
And what if that customer may lead to referrals and future business
down the road? Would you even be willing to spend more? |
To gain the highest amount of
bottom line profit (which in reality is the only number that you can take
to the bank) your spend on advertising should only be limited by what a
new customer is worth to you and what you are willing to spend to get
them.
Perhaps they are only worth a few hundred dollars to you over the next
five years. Well, then obviously you would need to keep your spend per new
customer down to an amount you can live with.
So rather than picking some random monthly number that will limit your
spending (and your revenue) figure out what a new customer is worth to you
and what you are willing to spend to get them. Then find the ways to
generate customers that fall within your range and get as many customers
as possible.
Advertising Budget Article
Copyright Empirical Publishing
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