How To Create a Marketing Budget (Proven Formula)

Summary

This video provides business owners, specifically opticians, with a clear and practical guide on how to calculate and manage their marketing budgets. By understanding the cost per lead and the required number of leads to grow the business, owners can confidently determine their marketing spend. The video highlights the importance of customer lifetime value (CLV) and how spending on customer acquisition can be a strategic investment. Viewers are encouraged to use a downloadable marketing spend calculator for accurate financial planning, ensuring long-term success in their business growth.

Takeaways

• 😀 Understanding the science behind marketing spend helps businesses make confident decisions about customer acquisition costs.
• 😀 To calculate the marketing budget, businesses must know the cost per lead and how many leads they need per month.
• 😀 An optician’s marketing budget, for example, is £5,600 per month if they need 20 leads at £281 per lead.
• 😀 The marketing budget is not just guesswork; it's based on the first-year customer contribution and lifetime value.
• 😀 Businesses with long-term customer relationships can afford to spend more on acquiring a customer upfront, as the customer is valuable over time.
• 😀 For businesses with one-time purchases (e.g., kitchens), the marketing strategy should differ, and spending the entire margin upfront might not be wise.
• 😀 A professional business owner should understand the dynamics of their business and how marketing spend impacts profitability.
• 😀 The marketing spend calculator can be a useful tool for businesses to test and adjust their marketing strategies based on data.
• 😀 It’s important for business owners to track and adjust their marketing spend regularly, using clear metrics and calculations.
• 😀 Downloadable resources, like the marketing spend calculator, can help businesses gain clarity and improve their marketing strategies.
• 😀 Understanding the long-term impact of marketing decisions is crucial to ensuring the sustainability and growth of a business.

Q & A

What is the purpose of the marketing spend calculator in the video?

The marketing spend calculator helps business owners determine the appropriate marketing budget they can confidently spend to acquire new customers. It provides a clear way to calculate how much money should be allocated for lead generation, based on factors like lead cost and sales conversion rates.

How much does the optician need to spend on marketing to generate 20 leads?

The optician needs to spend £5,600 on marketing to generate 20 leads, as each lead costs £281.

What key factor influences the marketing spend calculation for a business?

The key factor is the cost per lead (CPL). The number of leads required and the cost of each lead directly determine the total marketing budget needed.

Why does the speaker emphasize the importance of understanding the science behind marketing spend?

Understanding the science behind marketing spend allows business owners to make informed decisions. It enables them to know how much they can safely and confidently spend on acquiring customers without risking the financial stability of the business.

Why is the first year's contribution important when calculating marketing spend?

The first year's contribution is important because businesses that retain customers over multiple years (like opticians) can afford to spend more on acquiring new customers upfront, as they can recover the cost over time from repeat business.

Would the same approach to marketing spend apply to businesses that sell products with a one-time purchase, like kitchens?

No, the approach would differ. For businesses like kitchen sales, where customers typically only make a purchase once, the marketing spend would need to be more conservative. The first sale alone wouldn’t justify spending all the margin to acquire the customer.

What additional resource does the video provide for viewers?

The video provides a downloadable marketing spend calculator, which viewers can use to help them calculate their own marketing budgets and gain a clearer understanding of the financials involved in acquiring new customers.

How can business owners continue to apply the knowledge from the video?

Business owners can continue to use the marketing spend calculator to assess and adjust their marketing strategies as their business evolves. The video encourages viewers to download the tool and apply it regularly for ongoing business growth.

What kind of businesses is this marketing spend strategy most suitable for?

This strategy is most suitable for businesses that have customers with a long-term relationship or repeat purchases, such as opticians or other service-based businesses where customers return for ongoing services.

What is the significance of using real numbers rather than guesswork in marketing decisions?

Using real numbers helps business owners make data-driven decisions, ensuring they can effectively manage their marketing budgets and avoid wasting resources. This approach reduces uncertainty and increases the likelihood of successful business growth.