And other dumb vendor questions.

I can tell it’s ad renewal season because I heard this question four times yesterday from representatives of major advertising companies – a new record. These companies must be sending their reps to used car sales training, rather than consultative selling.

When I’m asked this question by a rep selling to one of my clients, my answer is a simple, “Zero.” Try it sometime. You’ll leave the rep speechless.

My clients have no discretionary advertising budget. We have no money sitting around just waiting to be blown on brand building, general awareness, or super bowl ads. We don’t spend advertising budget, we invest in new client acquisition efforts.

There is a major difference between the two concepts. To help you understand, let’s start by asking the right question, then following through with an example. Here’s the question that everyone (including you) should be asking:

How much am I willing to invest to get a new client?

This may take a little bit of time to calculate, and you may decide to change it over time. Check out my 2012 planning blog for some ideas. What portion of your client revenue would you give up to grow the business tomorrow, instead of placing that money in your pocket today? My educated guess is that it will be somewhere around 5-10% of client revenue. 

Let’s say your average client initially bills $5,000, and you would be willing to give me $350 if I handed you another client on a platter. Once you have the number, you just need to look for marketing venues that can deliver new clients for that price or less.

Now you’re investing. Having a fixed advertising budget at this point almost seems crazy. Why would you want to limit the number of new clients once you understand the acquisition cost? You’ll take new clients at that price all day long.

When the advertising vendors call, challenge them to tie projected results back to this number. If they can’t, your answer is a simple, “No, thanks.” If they can make the impressions, clicks, calls, and clients add up to your number (and you believe the math), then it may be worth a test. Vendors who buy into this investment concept WILL allow you to test.

If you can’t measure it, don’t do it.

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