April 21, 2010


Many of the challenges of modern marketing surround the cost of marketing.

One the one end, we have marketing channels that have significant cost associated with them, in large part because there is often a quantifiable return on investment associated with marketing channels. There is a reason it costs you six cents to rent a name for a catalog mailing ... because that is the cost where you make enough money over time to justify the cost. There is a reason that a Super Bowl commercial costs between $2,000,000 and $3,000,000 for thirty seconds ... the size of the audience makes it possible for just one in a thousand viewers to spend $100, allowing the large investment to break-even or even turn a profit if done well across 90,000,000 viewers.

The ecosystem has to deliver a return on investment that justifies the cost. Decades of trial and error shape the ecosystem.

Conversely, we read all about the world of "free". This is a world that is hard for the cost-based marketer to relate to. In the cost-based world, you craft a message, you identify the audience, you pay for the right to speak to this audience, you push the message at the audience, and you collect a return on your investment.

The world of free cannot work in this manner. With no cost to the message, there is infinite competition. And with infinite competition, the message must be of such enormous value, or the message will be drowned out.

Non-cost-based marketers defend the concept of "pull", of crafting something of such significant value that the customer wants to pull the value from you. There is a belief that if you give the customer something of such amazing value, the customer will pay you back.

My blog, for instance, works on this principal. One could argue that I give away more free information than any of my competitors. In kind, you reward me with 70% of my annual income.

The next five years will help determine the balance between cost-based marketing and free marketing. We know how to monetize activities that have a cost associated with them, and in many cases, we're losing this battle (traditional print-based newspapers). We haven't yet figured out how to monetize free activities (i.e. mobile apps, Twitter, blogs) on a mass scale necessary to drive mass adoption.

I'd be testing low-cost or no-cost marketing strategies like there is no tomorrow.

Profit per New Customer

It's common for folks to measure cost per new customer. Total Marketing Cost = $10,000. Total New Customers = 130. Cost per New C...