To a new business owner, marketing can be thrilling. It’s your first opportunity to get your business’ name and image in front of your core audience, and it promises to offer you a generous return on your investment in the form of greater customer loyalty and new business. Unfortunately, marketing is never a guarantee, and small business owners especially often feel the burn of a negative return on investment (ROI) after the first few weeks and months of a new marketing campaign.
In the majority of cases, negative ROI is the result of overspending. Even if you do see a marginal return in the form of new sales, if you’ve overspent on your marketing budget, there’s no way to recover that monetary loss. But hindsight is 20/20, and it’s difficult to know when you’re overspending on marketing until it’s already too late.
Over the course of my time as a marketer and an entrepreneur, there are five main ways I’ve seen business owners overspend on marketing.
1. Investing in Strategies With Insufficient Research
Inexperienced marketers and entrepreneurs sometimes believe their own instincts to be more valuable than hard data. They may have a preconceived notion of who their target customer is, how that target customer thinks and what type of advertising will work best for that target customer. These initial impressions may be grounded in reality, but without objective data to evaluate your thoughts, you won’t know for sure.
Here’s what often happens in this scenario: a strategy is executed—and in this case, we’ll say it’s $2,000 for Facebook advertising—based on the marketer’s instinct. After a month of running, the data comes in and it only amounts to $500 of new sales. It turns out the advertising channel—or message, or branding, or any other marketing factor, really—was not appropriate for the target audience, or that the target audience isn’t what you thought it was. Upfront research solves these problems proactively, and allows you to invest in the correct strategies the first time around.
2. Spending on Strategies With No Viable Measurements
We live in a technological golden age, so the good news is that most marketing strategies do have viable measurements. Any digital advertising you place should come with some kind of platform to track impressions, clicks and conversions. Anything you have funneling to your website should be visible in Google Analytics.
Nevertheless, there are some marketing strategies with nonexistent or insufficient forms of measurement. For example, if you start distributing flyers with your website on them, you’ll have no direct way to measure how many flyer readers ended up going to your website. You can measure direct traffic, but you’ll have no way of knowing which of those visitors found your site via the flyer. As a result, you have no way to measure your ROI, and the question of whether or not your marketing strategy “works” comes down to a best guess. This is an inefficient form of spending, and cannot be improved because it can never be measured accurately.
3. Pursuing Flashy Strategies With Questionable Returns
Again, we live in a technological golden age, and that means there are constantly emerging new devices, mediums and strategies you can use to communicate with an audience. Unfortunately, not all of these new strategies are the “next big thing in marketing,” and the majority of them are unproven.
If you’re a well-established company with a discretionary marketing budget, you have the authority and resources required to experiment with these new, flashy, unproven strategies. But as a small business entrepreneur, it’s not worth the risk. Investing in a new social media platform or a new technology before its effectiveness can be backed up with data is the marketing equivalent of investing in penny stocks. There’s a slim chance it will turn out great, but ultimately, it’s a bad investment.
4. Using the Wrong Resources for the Job
Rather than overspending, this is a form of inefficient spending. If you drive an SUV, you’ll pay more in gas than you’ll pay with a hybrid, and if you hire an inexperienced agency over a more efficient one, you’ll end up paying more for similar results.
When choosing the resources you want to create and execute your marketing campaigns—whether that means hiring an in-house team or contracting an outside agency—do your research in advance. Ask for references, review their processes and be sure you emphasize the importance of results. Invest in experts, and don’t be afraid to make changes if you’re not getting the results you need.
5. Neglecting the Fundamentals for Quick Results
Great marketing campaigns are already grounded with core elements. Your brand should be consistent and recognizable. Your message should be well-researched and directed. Your target audience should be identified and well-understood. These are pillars of marketing that sometimes take months to establish, and if you jump into a new marketing strategy hoping for quick results before you establish them, you’ll end up wasting your money. It’s the marketing equivalent of building a house without a foundation. Even if it takes some extra time and money up front, it’s an absolute necessity.
A little bit of preparation goes a long way in the marketing world. Before you get involved in any strategy or start making any goals, be sure you understand the potential pitfalls for new entrepreneurs and do all your research up front. Overspending isn’t about spending too much money in general; it’s about spending too much money on the wrong strategies or spending money in the wrong way. Cash flow is king for any new startup, and as long as you invest properly and nurture your investments, you should have no problem seeing a positive ROI and encouraging your business to grow.