3 questions to answer before investing more in your marketing budget

It’s tempting to invest large sums of money in your marketing budget when sales are lagging or the economy is slowing and revenues are falling. However, you may be wasting your money.

Before you jump into this new marketing fad or sign the expensive contract with the trendy boutique agency, take a few days to formulate clear answers to each of the following three questions.

1. Do you really need more customers?

This may seem obvious. The impulse is to think “of course, we need new customers! However, this is not necessarily always true.

Here’s an example to illustrate: Consider a subscription-based SaaS business that is currently experiencing increasing levels of churn, that is, customers who sign up but then cancel the subscription. At first, it may seem like adding more customers is the right solution.

However, simply pouring more customers into a draining funnel like this won’t do your business much good financially. At some point, you’re just going to miss out on potential new customers, especially if runaway customers are talking about their experience with your brand on social media.

In that case, you better work to figure out why your churn rate is so high and fix that first. Then you can revamp your marketing based on your response to this problem.

First, you can start conducting quick exit interviews when customers cancel to find out why they’re leaving. Maybe you learn that the problem is poor customer service. You might want to follow some of the customers who leave so you can dive deeper.

Then, based on that information, you fix the actual problem, which is the poor customer service experience. This could involve a combination of personnel changes, revisions to procedures, and improved training or other tactics. Then you can showcase your new, improved customer service experience as the centerpiece of future marketing efforts. You may or may not get old customers back, but you’ll add new customers who aren’t as likely to fall through the cracks.

Related: What to do if a customer ghosts you

2. Can you leverage your current marketing channels more?

Before increasing marketing spend in a new tactic or channel, make sure you’re not wasting the money you’re already spending. You might be surprised at how much you can optimize and improve your current systems and efforts. A small incremental optimization can yield significant results, while avoiding the learning curve you would have to master with a new channel.

Say your business has spent a few thousand dollars on freelance designers and conversion writers to create a new landing page for your current campaign. The landing page’s call to action asks viewers to sign up for a trial membership. Despite this investment, only about 2% of all landing page visitors sign up for the free trial subscription.

You can start over and create an entirely new landing page, create new ads to drive traffic to the new page, and run those ads on entirely new channels. These are all fairly large financial investments for uncertain profitability.

You can also look for ways to optimize the performance of the landing page you are already working with. Can you tweak the ad creative to drive a little more traffic? Is there close alignment between the ad title and the landing page text? Have you split-tested the call to action, or can you do it now? Can you use this conversion writer to help you optimize the page copy or call-to-action button color and text based on these test results?

Optimization requires collecting relevant data points and knowing how to interpret that information to make small changes or incremental revisions to a marketing asset to improve performance. You can double or even triple that 2% conversion rate for a much lower additional investment. That’s a big ROI that will help attract more trial users, which should trickle down the funnel to more paying customers and higher revenue.

Related: 6 Ways to Determine if Your Content Marketing Team is Delivering Results

3. What happens when your planned new investment goes well?

Think about the long-term “what if everything goes well” story. You want to create marketing channels that can grow over time so that you can continue to achieve marketing metrics as your business grows as well.

If you are limited in a certain tactic or channel, is this the right area to invest additional time, money and resources? The law of diminishing returns will dictate a change in strategy at some point. For example, there are only a limited number of local youth soccer league teams that you can sponsor. If you’ve explored this option as much as possible, there’s no real percentage to trying to find another team in an area a bit further out of town.

On the other hand, let’s say you reasonably think that paying extra attention to SEO with a focus on local marketing will help improve your marketing results. You think there are thousands of local searchers looking for the same services you provide every month. In this case, investing more money in SEO could have a significant and ongoing impact.

Related: 5 ways contracts are an entrepreneur’s best friend

Companies that don’t invest in marketing at all are dancing on the edge of a perilous cliff. However, pouring even more money into an underperforming marketing strategy without carefully considering all of the circumstances at play can be a bad investment. Take the time to clarify these three questions, and then make your decisions accordingly.