Opinions expressed by entrepreneur Contributors are their own.
It’s tempting to inject large amounts of money into your marketing budget when sales are lagging or the economy is slowing and revenue is falling. However, you may end up throwing your money away.
Before you jump on the new marketing trend or sign that expensive deal with the trendy boutique agency, take a few days to come up with crystal-clear answers to each of the following three questions.
1. Do you actually need more customers?
This may seem like a no-brainer. The impulse is to think: “Of course we need new customers!” However, this is not necessarily always true.
Here’s an example to illustrate: Consider a subscription-based SaaS business that’s currently experiencing increased churn — that is, customers who sign up but then unsubscribe. At first glance it might seem that adding more customers is the right solution.
However, simply pouring more customers into an emptying funnel won’t do much for the financial health of your business. At some point you just run out of potential new customers, especially when the fleeing customers are sharing their experiences with your brand on social media.
If so, you should better understand why your churn rate is so high and address that issue first. Then you can revise your marketing based on your response to this issue.
First, you could start conducting quick exit interviews when customers are leaving to find out why they are leaving. You may learn that the problem is poor customer service. You might want to follow up on some of the departing customers so you can dig deeper.
Next, based on that information, you fix the root of the problem—that is, the poor customer service experience. This may involve a combination of personnel changes, process overhauls and improved training or other tactics. You can then showcase your new, improved customer service experience as the centerpiece of future marketing efforts. You may or may not win back the old customers, but you will add new customers who are less likely to slip through the cracks.
Related: What to do if you’re being ghosted by a client?
2. Can you get more juice out of your current marketing channels?
Before you increase marketing spend on a new tactic or channel, make sure you’re not wasting the money you’re already spending. You will be surprised how much you can optimize and improve your current systems and efforts. A small, incremental tweak can yield significant results while avoiding the learning curve you would have to master with a new channel.
Let’s say your company spent a few thousand dollars hiring freelance designers and conversion copywriters to create a new landing page for your current campaign. The landing page’s call-to-action prompts viewers to sign up for a trial membership. Despite this investment, only about 2% of all landing page visitors sign up for the free trial membership.
You could start over and create an entirely new landing page, create new ads to drive traffic to the new page, and run those ads on entirely new channels. These are all fairly significant financial investments with uncertain payouts.
Alternatively, you can look for ways to optimize the performance of the landing page you’re already working with. Can you optimize the ad’s creative to get a little more traffic? Is there a close alignment between the ad headline and the landing page text? Did you do the call-to-action split test or can you do it now? Can you bring this conversion copywriter back to help you optimize the text of the page or the color and text of the call-to-action button based on these test results?
Optimization requires collecting a few relevant data points and knowing how to interpret that information to make small changes or incremental revisions to a marketing asset to improve performance. You could double or even triple that 2% conversion rate for a much smaller additional investment. That’s a strong ROI that will help attract more trial users, which should make their way down the funnel to more paying customers and higher revenue.
Related: 6 ways to tell if your content marketing team is delivering results
3. What happens if your planned new investment goes well?
Think about the long-term “what happens if everything goes well” story. You want to build marketing channels that can grow over time so you can continue to hit marketing metrics as your business grows.
If you’re overwhelmed with a particular tactic or channel, is this the right area to invest additional time, money, and resources? The law of diminishing returns will eventually require a change in strategy. For example, there are only a limited number of regional youth soccer teams that you can sponsor. If you’ve explored this option as much as possible, trying to find another team in a neighborhood a little further out of town won’t really make a percentage.
On the other hand, let’s assume you reasonably believe that additional attention to SEO with a local marketing focus will help improve your marketing results. You believe there are thousands of local searchers searching for the same services that you offer every month. In this case, investing more money in SEO could have significant, lasting effects.
Related: 5 reasons why contracts are an entrepreneur’s best friend
Companies that don’t invest in marketing at all are walking on the edge of a dangerous cliff. However, pouring even more money into an underperforming marketing strategy without carefully examining all the circumstances can be a bad investment. Take some time to get clarity on these three questions, and then make your decisions accordingly.