How Much Should You Spend On Marketing?

Quizzical_housewife_webOver the years of speaking and consulting, there are a group of questions people seem to ask over and over. One of those is a variation on the question, "How much should we spend on marketing?"

I was reminded of this question while reading Dan Kennedy's excellent monthly, "No B.S. Marketing Letter." One of his readers submitted a similar question and Dan responded in his usual caring fashion with:

"Couldn't be a WORSE question. Whatever number I give you slams a lid on growth. Why build a prison with an arbitrary budget?"

I couldn't agree more. I understand how Dan feels, too. It makes me a little bit crazy when people say things like, "There are too many trade shows." Or, "Direct mail is too expensive." Even Gary Vaynerchuk was quoted in a recent speech that he doesn't like old media because it's too expensive.

When people start this topic, my reply is a simple question. "If I were to guarantee you a 20% return on your dollar, how much money would you give me?"

The answer is obvious. You would give me ALL of your money. You would also go borrow as much as you can at 5% and give me THAT, too!

Next question. When would you STOP giving me money?

Again the answer is obvious. If I kept returning 20%, you WOULDN'T. You would only stop when I stopped the high return.

Peter Drucker famously said, "Because its purpose is to create a customer, the business enterprise has two — and only these two — basic functions: marketing and innovation."

Once you think about it, it makes tremndous sense. Innovation creates something the prospect wants that's different than the competition. Marketing communicates that to the prospect, who then becomes the customer. Everything else plays a supporting role.

Marketing, when done right, becomes self-financing! The dollar you invest today becomes $1.20. You reinvest the dollar and make another $0.20. Reinvest. Reinvest. Reinvest. Eventually, you're talking real money! :)

So the question should never be how much you should budget for marketing. The question should be, "How much did we get in return for that dollar we just invested?"

Of course, this becomes a sensitive issue in some marketing departments, because in reality, many aren't marketers. They're advertisers. Big difference. Too many "marketing campaigns" I'm shown aren't designed for direct response. They're designed for awareness (which I have never been able to cash a check on). They don't ask the prospect to take specific action.

I was recently asked to comment on an email campaign:

Me: What's the purpose of this campaign? I don't see a measurable call-for-action.

Marketer: Oh, the emails are just to make them aware of us.

Me: But what do you want them to DO?

Marketer: We want our salespeople to call them for an appointment.

Me: But how does the email help?

Marketer Advertiser: It's part of the campaign.

Me: Aaaargh

So, is your marketing self-financing? Do you expect that $1 invested today will ultimately turn itself into thousands, maybe millions of dollars? Or have you convinced yourself you can't measure marketing and it's just another line item in your budget?

Maybe you should have a conversation with your "marketers."