Stretching Marketing Budgets: Getting Up To 40% More For Every Dollar Spent
A common question business owners have is, “how much money should I spend for marketing and advertising?” Experts have offered general guidelines for budgeting such as the percentage of sales, objective and task, or competitive parity methods; but since every business situation is different, a hard and fast rule does not exist. One often-cited consideration is the Return on Investment, or ROI. However, if ROI was reliable and could be accurately measured, the answer would be obvious – spend every available dollar on marketing and advertising, then one would expect to recover the investment plus a healthy return. The reality is that one simply cannot spend oneself into prosperity; instead, businesses allocate scarce resources to marketing and advertising programs with the hope and expectation of a reasonable ROI.
Once the investment is made, return can be calculated from the resulting increase in sales revenue; but there are two important intervening metrics to consider:
1) The increase in traffic in the form of visitors to the store, or inbound phone calls; and,
2) The percentage of new traffic that is converted into sales.
The first metric, the increase in traffic, is important because it is the most direct measure of the effectiveness of marketing and advertising efforts, and it can be used to calculate the cost of each new prospective customer (i.e. how much is spent on marketing and advertising to have one new person come to the store or call). When a business is able to put a hard dollar value on each prospective customer that walks in the door and every inbound phone call, those rather routine events begin to take on increasing importance. For example, a ringing phone is more likely to be treated as an opportunity rather than an annoyance when one realizes the company had to invest $20, $100, or even $500 or more to generate that call.
The second metric, conversions into new sales, is important because if interested prospects cannot be converted into sales, any investment in marketing and advertising is wasted (i.e. how effectively are interested prospects led to a buying decision). When a prospective customer responds to an advertisement or promotion, they are generally ready to buy. However, these prospective customers usually need some help to make their ultimate buying decision. A little bit of effort can go a long way to closing a sale, increasing a sale, establishing a relationship, and earning a long-term customer; but indifference or neglect, or even the perception of indifference or neglect, can ruin the opportunity. This is especially true for inbound phone calls. For example, when a business receives a call from a prospective customer and places that call on hold to transfer the call, gather information for the caller, finish a conversation with another customer, or for any other reason, the tendency is for that caller to want to hang up. However, steps can be taken to control that tendency, reduce the number of hang-ups, increase the percentage of sales, and increase the dollar value of each sale.
Taking advantage of the time callers spend on hold by providing a program that reinforces and supports the company’s overall marketing message will decrease hang-ups by up to 40%, effectively stretching every dollar spent on marketing and advertising. Moreover, callers who are responding to advertising or promotions are already receptive to the message. In fact, they are calling to hear more about the products and services the company has to offer, and 20% of callers surveyed admit they have made a buying decision based on information they heard while on hold. On hold messaging works, and it can be one of the most potent tools a company has to get the most out of every dollar spent on marketing and advertising.