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It’s tempting to pour large amounts of money into your marketing budget when sales slow or the economy drags and revenues drop. However, you may be throwing your money away.
Before you jump into that new marketing fad or sign that expensive boutique fashion agency contract, take a few days to formulate clear answers to each of the following three questions.
1. Do you really need more customers?
This may seem like a no-brainer. The impulse is to think “of course we need new customers!” However, this is not necessarily true.
Here’s an example to illustrate: Consider a subscription-based SaaS business that is currently experiencing increasing levels of churn, meaning customers who sign up but then cancel their subscription. At first, adding more clients may seem like the right solution.
However, simply pouring more customers into an emptying funnel like this won’t do much good for your company’s financial health. At some point, you’ll simply run out of new leads, especially if the customers who are leaving are talking about their experience with your brand on social media.
In this case, it would be better to work on understanding why your bounce rate is so high and address that issue first. You can then revamp your marketing based on your response to this problem.
First, you can start conducting quick exit interviews when customers cancel to find out why they leave. Maybe you learn that the problem is poor customer service. You may want to follow up with some of the customers who leave so you can dig deeper.
Then, based on that information, you fix the real problem, which is the bad customer service experience. This could involve a combination of personnel changes, revisions to procedures, and improved training or other tactics. You can then present your new and improved customer service experience as the centerpiece of future marketing efforts. You may or may not win back old customers, but you’ll add new customers who aren’t as likely to fall through the cracks.
Related: What to do if a customer ghosts you
2. Can you squeeze more juice out of your current marketing channels?
Before increasing your marketing spend on a new tactic or channel, make sure you’re not wasting the money you’re already spending. You may be surprised at how much you can optimize and improve your current systems and efforts. Small, incremental optimization can yield significant results, while avoiding the learning curve you’d have to master with a new channel.
Let’s say your company spent a few thousand dollars on freelance designers and conversion writers to create a new landing page for your current campaign. The call to action on the landing page asks viewers to sign up for a trial membership. Despite this investment, only about 2% of all landing page visitors sign up for the free trial membership.
You could start over and create an entirely new landing page, create new ads to drive traffic to the new page, and run those ads on entirely new channels. These are all pretty big financial investments for an uncertain return.
Alternatively, you can look for ways to optimize the performance of the landing page you’re already working with. Can you tweak your ad creative to drive a little more traffic? Is there close alignment between your ad headline and landing page copy? Have you split tested the call to action or can you do it now? Can you bring this conversion editor back to help you optimize page copy or call-to-action button color and text based on your test results?
Optimization requires gathering some relevant data points and knowing how to interpret that information to make small tweaks or incremental revisions to a marketing asset to increase performance. You can double or even triple that 2% conversion rate for a much smaller additional investment. This is a strong ROI that will help attract more trial users, which should go down the funnel to more paying customers and more revenue.
Related: 6 ways to determine if your content marketing team is delivering results
3. What happens when your planned new investment goes well?
Think of the long term “what if this goes well” story. You want to create marketing channels that can grow over time so you can also continue to get marketing metrics as your business grows.
If you are limited to a certain tactic or channel, then is this the right area to invest additional time, money and resources? The law of diminishing returns will dictate a change in strategy at some point. For example, there are only so many area youth soccer league teams you can sponsor. If you have explored this option as much as possible, there is no real percentage in trying to find another team in a neighborhood a little further out of town.
On the other hand, let’s say you reasonably think that extra attention to SEO with a local marketing focus will help improve your marketing results. Believe that there are thousands of local searchers looking for the same services you provide every month. In this case, investing more money in SEO could have a significant and ongoing impact.
Related: 5 ways contracts are an entrepreneur’s best friend
Companies that don’t invest at all in marketing are dancing on the edge of a dangerous cliff. However, investing even more money in an underperforming marketing strategy without carefully examining all the circumstances at play can be a bad investment. Take some time to clarify these three questions and then make your decisions accordingly.