I ask some critical questions when I do a presentation for a company. One of the most important questions I ask, whether it is an industrial, material handling or financial services company, is “What is your budget”?
I tend to get three different responses:
- “We don’t have a budget.”
- An evasive, “Um what do you charge”?
- And then a slight percentage of the time, I get an actual number.
Why do people answer the first two ways? Well, there are a few reasons.
They don’t know a range and are looking for my input. That is perfectly fine. Their job is not marketing, and they might know an appropriate budget range.
They don’t want to say a range because they think I will say something close to the highest number. I don’t do that.
Why?
For one, it is not very ethical. Also, I have a price range that I operate within which is openly posted several times on my website.
Whether it is inbound marketing or video marketing services, you can probably figure out how much we charge.
So, what should your budget be? What is a good way to find out how much money you should spend?
Here is my thought. It is less important how much I spend vs. how my return. If something is within my spending allotment for marketing and I think it will return a good ROI, I am willing to give it a shot.
Now, how can you figure out if a strategy or tactic is worth the spend?
One way is to find your lead value. Then work backward to see how many new leads you can generate using that marketing tactic or strategy.
And luckily we have an excellent way to help you figure out how much a lead is worth.
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Let’s say you want to create a marketing video. You think you can generate 20 leads. Then out of that, 10 qualified leads (leads that have the budget and can use your solutions).
You can usually get three opportunities out of 10 qualified leads, and out of the opportunities, close one sale. Then the only question is how many times someone will buy from you.
If you are an insurance agency and renew a customer five times, you make that sale five times. So the LTV or lifetime value is 5x the sales price.
Let’s say the “sales price” is $10,000.
So we would get these numbers:
| How often will a customer buy? | 5 |
| Average Sale Price | $10,000 |
| Opportunities to Sales | 33.00% |
| Average Opportunities from Q.L. | 33.00% |
| Qualified Leads (Q.L.) from Leads | 50.00% |
| Leads | 10 |
This chart demonstrates shows you can spend $27,225 for your marketing video to break even. Although technically, you can spend whatever you want on your marketing video. However, most of our marketing videos come in at under $8,000.
If you spent $8,000 and got the above return, you are looking at a profit of over $19,000. Not too bad.
I know that generating leads is not the only goal for marketing, but if you want to tie a quantitative value to a spend it works.
If you want to figure out what your leads are worth and get an idea of how many leads you need to generate to get a profit, check out our template.