What's Your Marketing Return on Investment?

Your marketing ROI?
What should be your return on investment with a successful marketing plan?

Now, let's start by saying it's tough to project your return on investment. You can run different scenarios.

Step 1 Determine the revenue that 1 customer brings you.

A restaurant's average customer may bring $ 15 per person. But if 1 person comes back 5 - 6 times per year then 1 customer may return almost $ 100.

A hardware store's average customer may bring $32 per person. By the way, when I worked for Home Depot a couple of years ago Home Depot reported their average ticket price at $ 57 per customer.

A chiropractor's average patient may return about $ 1,000 per year.

Step 2 Determine how many customers currently refer business.

This expands the value of each customer. For every 100 customers you have, how many of them will refer a new customer?

It also reduces the cost of acquiring a new customer.

Step 3 Determine how much you're going to spend on your total marketing budget.

Some costs, such as web development, may not be budgeted 100% for the acquisition of new customers.

Let's say with web development, search engine optimization, display print ads and more, your total budget in a year costs $ 20,000.

So now, if you want a 1:1 return you know how many new customers you need to have. A restaurant may need 200 new customers for a 1:1 return on the same budget whereas the chiropractor may only need 20 new patients for the same ratio.

Step 4 Now Evaluate the Tools You Really Need

So now, determine the marketing tools and strategies you really need. A restaurant may benefit from a simple web site of only a few pages but a much stronger local internet search marketing effort. The chiropractor may choose to spend more on a complex web site and add features like a newsletter that can be forwarded on.

Determining the marketing return on investment for your business will really depend on the number and type of clients you need.

Creating a Marketing Budget

How much money should you spend on marketing your services or your products?

Here is a way to look at the issue.

How large is your current customer base and how much do they typically pay for your service or your product?

Do your customers generate enough referrals to keep you busy?

The larger your customer base, and the more active they are in generating referrals for either products or services, then the less money you need to spend on marketing -- to bring people in the door.

You can also read this article on 3 different types of hair salons and how much they need to spend on marketing.

I have a friend who's a CPA and he does the books for non-profit organizations. He really doesn't have to spend money on marketing at this point since he has a stable client base and he gets referrals from them.

However, if he wants to grow his business, say hire an office assistant, and go for higher paying non-profits as clients or market his expertise in a different way, then he'll have to spend money on marketing even if it's putting together a simple brochure and perhaps a simple web site.

The money you spend on marketing doesn't have to be much, but it should reflect the overall company goals and objectives.

Ask yourself:

1. Do you provide a premium customer experience or premium product?

2. Do you have more middle of the road services or products?

3. Do you have more of a mass market commodity item?

The more premium of an experience you provide, your marketing dollars may be less since you need fewer people. You just need to target the money to the right people and audience.

Or, you could spend proportinately more marketing dollars to reach fewer people if the clientele is high end. However, if they're satisfied with your product or service then they should generate word-of-mouth leads.

Don't Waste Money on Marketing! Plan, plan, plan!

This why it saves you money to plan for the whole marketing cycle before you spend money on marketing.

A business owner who came to me recently spent money on marketing, yet he was unhappy with his results.

He had spent marketing money on a website, blog, article submissions, public relations, postcard deliveries and yet he was concerned that nothing was returning a positive return. Perhaps the expectations weren’t properly set.

So here is a free marketing tip on why setting out a complete marketing plan is necessary to guide business decisions and the money spent on marketing.


Idea of Product or Service or Existing Product or Service

You have an idea for a product or service. A few years ago, I spoke with a computer repair specialist who wanted to launch a company that would compete in his local area with Best Buy’s the Geek Squad. He felt he had a competitive advantage.

You can start spending money to market your business idea, or you can spend a little money to begin testing your idea.

Testing Your Idea, Product or Service

Stick to the basics. Who is your target customer or client? Make up a simple questionnaire that can be answered within a minute. Or paste pictures that represent your idea or product onto a small poster board.

Let’s say you have a product that increases gas mileage.

You, or someone wanting to make extra money, hangs out near gas stations, malls, etc.

You ask representative questions:

“Would you like to increase your gas mileage without changing your vehicle?” (everyone will answer yes so it frames the need but doesn’t give you an idea on the product or service)

“Would you be willing to pay between $ 5 - $ 7 if it saved you $ 30 a month on gas?” (pricing)

“Would you purchase such and such a product from friends or at a store?” (distribution)

“What information would you need to make a purchase?” (getting to trust and credibility)


You could continue to survey in many different ways or seek information.

Start up a no cost blog and hand out a postcard with the url. Watch the traffic. If no one visits then they may not feel strongly about the issue meaning you need to focus on consumer education.

Plan and Budget Developed

Coming up with basic information, will help you decide how much to spend on graphics, printing, search engine optimization, face to face networking, etc.

Also, how much money does one sale return? Is the sale one time or will it result in repeat business? You spend “x” dollars on marketing and how long before sales begin to pour in and exceed your marketing costs? This gauges your return on investment.

Develop the Marketing Message and Image

Armed with basic information will help develop the marketing message and image. This is necessary money spent on marketing. It helps with objective information.

Marketing Activities

Set out the marketing activities, then measure them monthly, quarterly and then evaluate which ones are working and which are not. Stick with those that work.

Repeat the cycle. If sales pick up momentum then you can back off your marketing costs.

Spending Money on Marketing

How much money should I spend on marketing my business?"

That's a question I've often been asked and here is how I answer.

First, let me state that the expertise of the business is the best marketing tool. Do a great job in what you offer, and your marketing budget will need to be less since more referrals should be generated.

There are 3 ways to categorize how much a business is going to charge for its services:

1. Premium pricing

This is where the customer expects high value and an "experience."
At this pricing level, both the business and customers self-select on the services they need. Personal referrals are the most common way for businesses to grow at this price.

A marketing budget is going to reflect targeted media and targeted activities. A corporation could make the choice to run full-page glossy ads in high fashion magazines.

A service company or individual may only need to spend little marketing money and target to spend on thank-you notes and gifts.


2. Competitive Pricing

The customer wants a good product or service and a fair price.
At this pricing level, personal referrals are still common but more of an "argument" may be needed to persuade customers. Therefore, brochures or upgrades to web sites may play an important role as well as offering free seminars with take-away value, etc.


3. Bargain Pricing

At this level, your price is lower and more customers are needed to bring a profit to the business. Ironically, this where a larger marketing budget may be needed. The more "traffic" a business needs to generate, whether online or to a brick and mortar store, the larger is the marketing budget.

Finally, marketing must be done consistently. Whatever activities are chosen and whatever pricing levels are decided on, they must be done reguarly over a specified period of time to generate business.