At Iff, we consult with companies across various sectors and services – from Retail to Education to Financial Services. No matter how big they are, they almost always ask the same fundamental question: “How much should we be spending on digital marketing?”
This is a question that every business needs to be asking and there are many dependencies to consider, but my answer is always the same. You probably should be spending more – and here is why!
Good marketing is about spending as much as possible! But crucially, this needs to be spent as efficiently as possible and within an effective commercial model to get the most profitable return.
Whether you’re a retailer, a university, or a fintech company, it’s imperative that your teams are aligned on the right KPIs and have a shared understanding of how to arrive at a sensible acquisition target.
The first place to start is identifying an effective or acceptable Cost per Acquisition (CPA) or Cost of Sale (COS) target that is commercially viable for the business. Next, your marketing team should constantly be looking for ways to spend more money more efficiently. After all, when you’re spending the right amount to acquire the right customers, the only limitation to growth is your ability to fulfil demand.
Of course, not all customers are created equal. With this in mind, your acceptable acquisition costs depend on a number of variables: channel, conversion rates, average conversion value, discounts, returns, etc. – which is why the boardroom needs to be fully aligned about what is an achievable CPA/COS target taking into account all performance and trading dependencies.
This might seem simple but gaining clarity and agreement on an acceptable acquisition cost is the single most important thing you should do. It is where all good marketing campaigns should start. Spend too little, and you’ll risk losing sales to the competition; spend too much, and you’ll damage growth and profit.
The marketing world can often seem overwhelming (new technologies, channels, etc.). But while the ways we interact with customers are constantly changing, the fundamentals of good marketing remain the same: focus on your customer, find an acceptable cost per acquisition formula, and make sure everything you do brings an incremental impact.
If there’s anything here that you’d like to learn more about – get in touch, we would love to catch up.