What is the cheapest form of marketing?

We’re often asked, “What is the cheapest form of marketing?”  And it seems a perfectly reasonable question. After all, the cheaper the marketing, the higher the potential return on investment – and it won’t disrupt the business cashflow either.  That’s the reasoning we usually hear, and there’s certainly a degree of truth to it, if you can find the right low-cost marketing tool for your needs.

But what usually tends to happen with cheap marketing, is that you end up competing with loads of other businesses within your sector.  Everyone is competing for the same keywords and search terms, making for a crowded area of digital space.  Ultimately it becomes all about who can provide the product or service at the lowest cost.  The customer has so many different providers to choose from that every business can find the amount of leads and customers actually falling away, rather than increasing.

It's all about your return on investment

What these businesses fail to understand is that marketing is all about return on investment.  What are you getting  back for the money invested in your marketing budget?

You need to calculate what a customer sale is worth to your business.  How much is profit, and how much is the lifetime value of that customer?  Is it going to be a one-off sale?  Or could it lead to a long-term relationship with the customer, which will bring in much more money?

The higher the return and profit, the more you can spend on your marketing.  And if the lifetime value of a customer is going to be very high, it can even be acceptable to make a loss on your marketing.  A customer who’s going to spend a lot of money over a period of months, or years, is a highly worthwhile investment.

This is one of the most fundamental aspects of marketing, but it’s also one that most people simply don’t understand.  You need to have an idea of how much to spend for each new customer gained, bearing in mind their lifetime value to your business.

Should we be looking for the most expensive form of marketing instead?

There’s another theory which suggests businesses should be looking out for the most expensive marketing options, rather than the cheapest.  It sounds counter-intuitive, but there’s actually solid reasoning behind this theory.  That’s because the majority of your competitors will be heading for the cheapest marketing options, so your business will end up spending more money, even at the cheapest end of the market, to rise above the crowd.

But spend more money on your marketing from the outset, and your competitors are instantly reduced, because they’re all focussing on the cheaper options!  Yes, your initial investment is going to be higher, but so are the returns in the form of leads, enquiries and sales.

Marketing is all about return on investment.  It shouldn’t be about which is the cheapest option, or the most expensive.  It’s ultimately about which is the most profitable form of marketing for your company.