I have a confession to make: I don’t set a rigid marketing budget for my business. What can I tell you? The whole idea of budgeting feels too restrictive to me. What? You too? I figured as much. But that doesn’t mean that I have NO marketing budget. I’ve decided to reframe the entire concept of budgeting and turn it around in a way that is much more appealing to me.
What if You Could BUY More Customers?
How would you like to have all the customers you want and were able to service? Sounds good, doesn’t it? Well you can.
Before I get into the details, I want to make sure that you have the two most critical customer attraction elements under control:
- You’re targeting a specific “ideal customer” niche. If you say (or think) that everyone can use your product or service, you are sabotaging your business. You can’t sell anything to everybody. And when you try, nobody feels that you are talking specifically to them, or that your product or service can address their specific needs.
- You’ve crafted an irresistible offer. If you’re putting the focus on the product or service (e.g. insurance, pizza), then your ideal customer doesn’t know HOW or WHY to choose you. Craft an offer that appeals to your ideal customer. For example, insurance for new homeowners.
In order to set a right-sized budget, you will need to have these two elements firmly defined. You need to remember these elements when generating revenue and profit reports based on your customers’ spending. You also need to keep track of the products and services that they purchase.
How to Set Your Right-Sized Marketing Budget
It’s so easy even a math-hater could do it! In fact, you won’t be able to stop yourself from doing it right now while you’re reading this article. Just follow the steps below.
- Start by choosing a single “ideal customer.” Picture that customer in your head right now. Think about the people, what they buy, how they buy and how much they buy.
- How much revenue did you get from that “ideal customer” last year? Chances are you’ve got a pretty good idea of what that number is right now.
- Now, subtract the costs associated with that customer. You may not know that particular number off-hand, but you could probably estimate some general cost percent. It might be 25% or 30% of the revenue that it costs you to maintain that business.
- The number you have left is the annual profit that this customer has ALREADY contributed to your business. See? That was easy. In fact, if you really want to get happy, take the number of years that they’ve been a customer and multiply it by that profit number. That is now the LIFETIME value of that customer.
- Realize that this customer has already given that money. You might still have some in your bank account—or you may have already spent it. The key distinction that you have to make from now on is about how you will invest that money.
You can go on a vacation, you can hire more people, you can buy equipment. Or you can invest that money in creating a marketing system that will get them to choose you.
That is a right-sized marketing budget. I love this method because it ties the money you spend to the size or spending capacity of your ideal customer. It doesn’t make sense to overbuild a marketing system for a customer, especially one that doesn’t require a million dollar investment. At the same time, you might find that you’ve been grossly underinvesting in your marketing system, and it’s no wonder your sales with ideal customers are low.
Your marketing budget is like a fire. You don’t have to have a lot of wood or material to start it, but you do need to feed it if you want to stay warm.