Knowing where your ad spend goes and what it produces is the best way to escape the marketing budget trap.  Photo by

Knowing where your ad spend goes and what it produces is the best way to escape the marketing budget trap. Photo by

There are few things that frustrate me more than hearing a client that made four to 10 times what they spent on marketing say that they can’t spend any more! What? You spent $2,500 and made $25,000 in gross profit, but the owners have given you a budget? This make no sense at all!

When you “budget” your marketing, you are apparently saying that your marketing programs aren’t working. In many cases, that may be true. That’s why it’s important to track everything you do in marketing. If it’s not working, you shouldn’t be doing it! If it is working, you should be doing more of it!

Step 1: Know Where the Money Goes.

John Wanamaker, one of the pioneers of marketing, once said, “Half the money I spend on advertising is wasted, the trouble is I don’t know which half.” Advertising was hard to track over 100 years ago when Mr. Wanamaker made this statement, but in today’s world, there’s no excuse for not knowing which of your marketing programs are working. Today we have computers, tracking phone numbers, great CRMs, trackable websites, and many fantastic lead providers that will all help you track your advertising investment.

Yes, I said advertising investment! Great marketing is not an expense; it’s an investment, an investment that should always return multiples of the amount of money invested. It has been said that, over many years, the stock market has returned an average of 7% annually. Based on that, if you have $10,000 invested in the stock market, your return on that “investment” is about $58.34 per month. If you invest that same $10,000 on marketing and generate four to ten times the amount invested, your return will be $30,000 to $90,000 per month.

Granted, the gross profit made on sales doesn’t all go directly into your pocket, but I promise you, you’ll have a lot more left than $58.34. Let’s say you invest $10,000 in a marketing program. With the leads generated you sell 20 vehicles at an average gross profit of $2,500 for a total of $50,000. If you pay out 30% of that money in commissions that’s $15,000. Let’s say that there are other expenses that add up to another 10% or $5,000. So, you made $50,000, invested $10,000 in the marketing program, paid out $15,000 in commissions, and paid out another $5,000 in other expenses. That leaves you with $20,000! I’m a business owner too and I know that much of the profit from incremental sales goes straight to the bottom line and into my pocket. That’s the great thing about owning a business.

Step 2: Know Your Numbers.

Now that you have a better understanding of marketing as an investment, you must start treating it like you would any other investment. You must know your numbers! What gets measured, gets managed! If a department head wants to spend money on a marketing campaign, give it to them, but make sure they know that you will want the numbers after the campaign. And the most important numbers are the amount invested and the return on that investment. In other words, what did we spend and how much gross profit was created from sales to the leads generated. The cost per lead and the cost per vehicle sold is not important. The only important factor is the multiple of money spent to gross profit generated.

That brings up another important point: You invest money to generate leads. How well are those leads being worked? Are your people following up on every lead until they “buy or die?” Watch for future articles on how to best track these important items.

You should also realize that selling more vehicles using Investment Marketing will cause logistical challenges. You will need to buy more vehicles, you may burn out some of your people, and you will need to decide what to do with all the extra money you’re making. Some of that money should be invested in training your people. That’s another investment that will pay big dividends! Your lead providers likely have some great training material that is there for the asking.

Start treating your marketing as an investment and enjoy the dividends! Good luck and good selling!

Denny Long is president of Credit Mail Experts and ranks among the industry’s leading experts in direct mail and subprime marketing. Email him at [email protected].