While I understand cash is king to any business, and hard to keep, I find most business owners don’t “get” ongoing digital marketing costs adding to their bottom line. They really don’t.
One of the realizations that I have found as a web developer is that while it might have made sense to the business owner upfront to build a website to draw leads and sales, it doesn’t necessarily make sense to maintain, add content, and to keep it actively marketing for leads and sales. I really think these entrepreneurs believe, or hope, their website will run itself at some level. Of course nothing runs itself. They also believe they can “save money” by not hiring a marketing professional typically. Nothing could be further from the truth.
“Chris, I can’t afford to maintain and market my website.” Again, I get the bottom line importance but is digital marketing truly an expense?
“If I’m selling widgets at x amount how many of those widgets would it take to pay for my marketing?” That is how most business owners look at marketing in general. There is another aspect to online marketing that needs to be looked at however. Sales increase. This is a hard one for a business owner to get his or her head around as it is an unknown.
An Educated Guess.
So the real question is what is an increase in sales percentage that is believable and attainable? With like company references (or industry comparisons) and conservative estimates an educated guess can be had. So now the math changes. “If I’m selling widgets at x amount with an increase of x percentage how many of these widgets (or services) would it take to pay for my marketing?”
The Real Math for Digital Marketing.
Here’s an example of when growth in sales happens with marketing. It’s a beautiful thing.
Over the past 6 months your company has spent $5,000 on online digital marketing of some sort. This effort brought in 150 leads, converting at a rate of 10%, generating 15 customers. These 15 customers had an average order size of 800 widgets. Your widgets have a COGS of $1 each, and sell for $2.50. Here’s the math.
Gross Revenue – Costs of Goods Sold = Gross Profit
(15 orders * 800 widgets * $2.50/widget) – (15 orders * 800 widgets * $1/widget) = $18,000
(Gross Profit – Marketing Investment) / Investment = Marketing ROI
($18,000 – $5,000.00) / $5,000.00 = 260%
Marketing ROI of 260%! This means for every dollar your company spent on online digital marketing, it brought a return of $2.60. Your $5000 dollar investment paid off handsomely adding to the bottom line not becoming a liability and cost.
You Can’t Afford Not to Market.
Can you really afford to not look at and execute some sort of digital marketing? If partnered with a knowledgeable company like totallysales you could grow your company exponentially. And let’s be real… either a company is growing or dying. There’s no coasting and “taking care of itself”.
Resource for Marketing Math: A Simple Explanation of the Math Behind 7 Common Marketing Metrics.© 2000-2018 totallysales | Photos courtesy of 123RF