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It always amazes me when I read or hear about other marketing experts who advise clients to budget marketing based on a straight percentage of projected sales, like 5% - it's a lazy answer used by poorly trained marketers who can't (or don't want to) calculate return on investment (ROI) for the programs they deliver. Sure, you have to start somewhere, and a basic percent of sales is a sensible starting point, but that's ONLY the beginning of the conversation, and to leave it at that is to leave out the most important part.
Your marketing budget should provide you with the ultimate leverage for growing your business. What we mean by leverage is that increase in sales achieved for every dollar invested (yes, you should be able to measure this, and any "expert" advising you on how to spend your marketing dollars that can't set you up to do this isn't worth a dime of your precious cash). For example, if you have a specific treatment option like McKenzie that you advertise in the paper at a cost of $1,500, and it produces three new patients AND one new referral relationship, what's the ROI on that? If the average course of treatment is $850, and the new referral relationship is worth $30,000 annually, then that single ad provided quite a bit of leverage for your business:
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3 patients |
x |
$850 |
=
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$2,550 |
| + |
1 referral source |
x |
$30,000 |
=
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$30,000 (1st year only!) |
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Total Revenue: |
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|
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$32,550 |
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Return on Investment: |
$32,550-$1,500 = $30,550 or >2000% |
If running that ad again meant that you would need to go over the "5%" of revenue recommended by the lazy consultant, would you do it? Assuming you could handle the new business, OF COURSE.
To pull this off, here are three steps to follow:
- Find a marketing services provider with a proven system for your industry who will be accountable for results. You will know when you've found the right provider if they satisfy three critical requirements. Click here to download a complimentary Marketing Guide, and read the requirements on page 4.
- Establish a "starter" budget to set up a basic tactical system for generating, qualifying, and following up with prospects. The most common mistake a marketer can make is to run an ad without a system to capture and nurture the leads. Your starter budget should also include a provision for testing to find out what marketing strategy produces a positive ROI in your market. Your marketing services provider should know how to run your marketing with built-in-testing. Ask them for a sample of a test report. If the report does not show specific documented results for REVENUE, that is a red flag. If you would like to work on a recommended "starter" budget, click here to download a Marketing Assessment Survey.
- Be patient. With the right marketing solutions provider, the process of setting this up and beginning to see a positive ROI can take several months. It's like pumping water from a new well - first it's air, then spurts of water, and if you keep pumping, finally, a steady stream. To have enough patience, it helps to have a clearer understanding of how you will get to where you want to go. To give you a better idea of what the journey can be like, click here for a short video preview.
So, if you currently budget based on a straight percent of revenue, it may be time to reassess your strategy - the results can be extremely satisfying.
For more information on Fortune 500-style marketing on a small business budget, please visit www.PTreferralMachine.com.
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