Several times over the course of my career I have run into the common misconception that marketing should become increasingly efficient as we scale.
Whether it’s a CEO, a president, or a colleague, there’s often a false belief that the incremental money we spend in marketing should be more efficient than our baseline budget.
Unfortunately, that couldn’t be further from the truth.
While a business can certainly realize cost savings through scale (e.g., reduced cost of goods sold), the truth is that the more you spend in marketing the less efficient your marketing becomes.
Understanding Existing Efficiency
Your organization should already be investing your existing marketing budget in the most efficient ways possible. That means that if your budget increases you’ll have to invest in less efficient actives.
Understanding Organic v. Paid
Inquiries coming through your website (often considered “organic”) will almost always have a dramatically higher inquiry to start conversion rate than inquiries driven by paid media channels. However, when it comes to spending that increased marketing budget? The only way to spend it is on paid media efforts. This results in a higher proportion of paid inquiries in your total inquiry pool, which drives down your total blended conversion rate.
Quality Diminishes As Paid Media Channels Scale
Finally, it’s important to to understand that paid media channels (e.g., Paid Search, Paid Social) are notorious for being a source of decreasing quality as spend increases. The reason for this simple: The more you spend the further out you have to invest. In the case of paid search for example, small budgets cover branded paid search (highest quality), followed by regional non-brand paid search (moderate quality), and finally a non-brand national expansion (lowest quality).
This isn’t to say there aren’t rare cases where increased marketing spend can increase efficiency, but in almost all cases the benefits of scale benefit the business, but not marketing.
So the next time you’re in a budget meeting and someone asks what marketing could yield if they only doubled your budget, don’t be shy about telling them it’s less than double your current yield, because…
The more you spend in marketing the less efficient your marketing becomes.
Kanahoma is an education marketing agency based in San Diego, California. We live, work, and play at the intersection of beautiful brand creative and effective direct response marketing.
You can learn more about what we do and how we do it at Kanahoma.com.
Thanks for reading,