Spending Your Marketing Dollars Wisely: Going From Gambling Towards Certainty
It was Lord Leverhulme, British founder of Unilever, who said, “Half the money I spend on advertising is wasted, and the problem is I don’t know which half.”
Similarly, anybody working in business faces a difficult dilemma on a daily basis: we know that we MUST commit money and resources to promoting our business if we are to stay in business. On the other hand, we cannot be 100% certain that we are getting the highest-possible return on our investment on our marketing dollars. In other words: some of our marketing budget is likely being wasted each month.
Faced with this dilemma, most of us simply give into inertia, month after month. Meaning: we just keep doing what we have always done, even though we are far from certain that it is the best thing for our business.
But, giving into intertia is dangerous. Spending money on marketing without making sure we are getting the highest-possible return on our investment dollars is akin to gambling. So is doing no marketing at all. And yet, companies everywhere continue to treat their marketing decisions like a game of roulette, year after year.
The way out of this dilemma is to follow a data-driven decision-making approach to spending your marketing and advertising dollars. In fact, this is the only way to significantly reduce your decision-making uncertainty while moving toward ever-improving marketing ROI. Here are some steps to getting there:
1. Gather together all known marketing options (i.e., channels, media, methods, etc.) that are within your means to afford at this time.
2. Calculate the expected return on investment for each one. Remember, expected ROI is calculated as follows: (Expected Gain from Investment – Cost of Investment) / Cost of Investment
3. Choose one or more marketing options* as a test.
4. Execute your campaign on a modest scale – but make sure you invest enough resources in your campaign in order to yield enough data to gauge results later.
5. Push “pause” on your campaign and evaluate the results of each element you tested in terms of return on investment. This time, however, substitute “Actual Gain” for “Expected Gain” in the ROI equation.
6. Repeat steps #3 through #5.
* Note that you may need to test just one marketing option at a time in order to accurately track how each one affects your revenues.
By following these steps, you can move yourself from being a marketing gambler to being a marketer who is guided by an unwavering commitment to pursuing the best-possible marketing investment ROI.