A Change of Marketing Mindset for the Internet Age

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Back in the day, everybody had an advertising budget.

Even if you were a sole trader, you had a rough idea of what you would spend on marketing/advertising/promoting your business in a year - even if it was just a made up figure to keep the local Yellow Pages rep happy!

For the majority of business (especially in the UK) this was - and still is - the norm.

But what I’m going to suggest to you today could change how you think about spending on advertising and marketing forever.

I’m going to suggest you disregard the concept of ‘budget’ in the old sense of the word.

Why am I saying this? Well, the way the internet is moving – and has been moving since around 2002 – the concept of an annual marketing budget is getting harder and harder to apply.

Never before has a business of any size been able to test and track their marketing efforts to the penny so accurately. And never before has competition been so fierce in all markets. Businesses and consumers are rapidly turning away from traditional media and focusing on the internet.

People are favoring news websites over newspapers – Youtube over TV – blogs over magazines…Of course; businesses are catching on and want to get in front of these ‘eye balls’ – but beware. The old advertising model won’t work here. Neither will the old ‘advertising budget’ concept.

Rather than paying for these ‘eye balls’ by the thousand and hoping for the best, we need to adopt a whole new approach. Not an entirely new approach – in fact the basis of this thinking is almost 100 years old, but rings so true today it’s scary.

This new advertising space is being sold in a totally different way and I believe this new way could filter down into more traditional media as time passes.

So what is this model?

If you’ve ever advertised on Google, you’ve already experienced it. Some call it pay per click, but the more generic term for the whole concept is Cost Per Action. That is, you only pay the advertiser when a prospective customer does something. That ‘something’ is generally clicking on your ad, but in some instances, it’s filling out a form or completing a sale.

Is this a bad thing?

Not at all! It’s bloody marvelous!

Think about it – you only pay for your advertising when someone actually DOES SOMETHING.

Cost per action advertising, along with proper testing and tracking of your ads, puts an end to shooting in the dark forever. As a business owner, you are now able to fairly easily work out how much it costs you to get a lead, and get a sale. With time and testing, you can reduce the cost of an action, and therefore increase your profits at the same time.

So if you know exactly how much it costs to get a customer, why on earth would you need an advertising budget?

Surely once you’ve established your cost of acquiring a customer is lower than your profit, the last thing you want is an advertising budget!

Think of it like this – if it costs you £20 in advertising to get a customer that makes you £50, why would you limit it with a budget? You’d simply scale up the advertising as fast as infrastructure and cash-flow allows – right?

Here’s the rough method behind the cost per action advertising process:

1. Test your ad & sales process on a small scale,
2. Measure the results,
3. Modify the ad,
4. Test it again,
5. Compare it to the previous one(s),
6. Repeat steps 3-5 until you’ve found the cheapest possible cost per action,
7. Scale up the successful ad as quick as you can,
8. Count your money.

Obviously, there’s a lot more to it than that (this is when people like me come in handy!), but overall process is pretty simple.

Hopefully next time you hear someone talking about advertising budget, you’ll think about this post and begin to change your thinking around to cost per action instead!