January 24, 2022

Incremental Gain

So you'll spend $300,000 next year on digital marketing, and you want to see what would happen if you spent $400,000 next year ... you run your simulation.

You generate $199,000 in sales in the first year, then you experience diminishing returns as most of those customers do no repurchase thereafter.

You lost $40,000 spending additional money on digital marketing - after that, you generate more profit per year for four years. In total, however, your decision cost you $6,000 profit after five years.

If you extend the payback window beyond year five? Yeah, you're going to come out ahead.

I'm getting a lot of messages from you ... "it is now too expensive to acquire customers, we have to cut back".

If you cut back your marketing spend, you'll likely be more profitable in the short-term. Long-term? Run the simulation and find out. Regardless, we need to introduce this short-term / long-term tradeoff analysis to the work we perform, correct?

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Who Is In Control?

At every company, there are the people who appear to be in control (Owner, Board of Directors, CEO, Executive Team). Then there are the peop...