There is usually a lot of excitement around a new digital marketing channel or a platform. Everyone is talking about it, so many marketers and business owners naturally start thinking about using it to promote their ownproduct or service.
We’ve recently seen this with Virtual Reality, Augmented Reality, and social media channels like TikTok. Do you need to move your marketing budget around and double down on these new opportunities? While the fear of missing out on the next big thing is understandable, the decision-making process is often flawed.
Broadly speaking, which marketing channels you place small and big bets on will greatly impact your business in terms of growth rate and return on investment (ROI).
While it’s true that early adopters do benefit the most, it’s also true that they pay a large premium for their choice. For example, many companies have wasted a lot of time and money on failed VR/AR projects or failed campaigns on the new social media channels like TikTok.
Some startups may have the financial backing to play the high-risk, high-reward game that early adopters play, but most startups and small businesses do not. This is why we typically do not recommend that small companies make big bets on unproven digital marketing channels.
For most small businesses with limited marketing budgets, certainty is vital. Therefore, betting on unproven marketing channels is typically unwise. Yes – you may not increaseyour sales tenfoldwith a proven marketing strategy, but you also won’t waste precious marketing dollars.
Media loves a ‘big success story,’ so there is no shortage of remarkablestories with unconventional marketing. However, the reality is that these success stories are extremely rare and are hardly repeatable.
So if you shouldn’t chase the next shiny thing, what should you do instead?
Tried and True (With A Sprinkle Of New)
For the vast majority of small businesses, focusing on proven marketing channels and tactics produces the best return on investment. We are not suggesting you completely ignore new or unproven ways of promoting your business, but you shouldn’t bet big on them.
Instead, invest most of your marketing dollars in 1-3 proven channels, but also make many small bets on untested channels. For example, you may allocate 80% of your marketing budget to Facebook, SEO, and Email. And 20% to experiment on TikTok.
Note: The “experimentation” part of your budget should also be used on well-established channels (not only emerging channels and platforms). For example, YouTube has been around for over 15 years, so it cannot be considered new. However, it is still new to most small businesses as a channel (tactic) to promote a business.
Two Essential Metrics You Need To Know
The next question should be, how do I distinguish between proven channels and unproven channels? And be able to allocate my marketing budget accordingly.
The beauty of digital marketing is that everything can be analyzed in great detail. There is no shortage of data to collect and examine, so it’s relatively easy to calculate customer acquisition costs. For example, if you acquired 10 new customers by spending $1,000 on Google Ads, then your customer acquisition cost is $100/customer. This is a simple example that doesn’t include some costs associated (e.g., labor), but you get the idea.
You alsoneed to calculate your customer lifetime value (CLV) because not all customers are created equal. In simple terms, Customer Lifetime Value is the financial value of your customer during their entire relationship with your business.
Additionally, your CLV will vary from channel to channel, and from campaign to campaign. For example, attracting a price-conscious customer (e.g., Ad with a heavy discount) may bring you a new customer, but probably not a repeat customer.
Knowing your CLV forces you to think long term – ‘how do we acquire a customer and keep them happy,’ versus short-term thinking – ‘how do we acquire a customer.’
In essence, every marketing channel you invest in should have a customer acquisition cost and customer lifetime value associated with it. Once you know those numbers, it will become evident where to place big bets and where not to.
With regard to small bets, focus on emerging channels that you notice your customers adopting (e.g., TikTok), or well-established channels that you are not familiar with (e.g., Podcasts).
There is no one golden rulefor which marketing channels you should and shouldn’t use to grow your business. There are just too many variables – industry, timing, market maturity, business maturity, customer trends, etc.
This is why its vital to review marketing data regularly to understand your customer acquisition costs and customer lifetime value. Without it, you cannot make sound decisions, and which channels to bet big on and which to only experiment with.