Break even with your marketing
Russell Brunson of Clickfunnels fame states that the goal when creating a sales funnel is to break even with your advertising.
This means that for every dollar you spend you get $1 in return.
Depending on the type of business you are in this might take a few weeks or a few months to get there.
There are many businesses that actually lose money on the front end of their business but make money on the back end.
What this means is that they lose money when they acquire a new customer usually by giving something away for free but make money on the backend when they sell them their main products/services.
They know they can do this because they know exactly how much they will make from the people that opt into their funnel.
In the roofing space, depending on the type of business and the type of customers you are going after this same principle applies.
Let’s break this down.
For most roofing contractors that focus on selling residential roofs, a small roof replacement is about $10K with about $2k in profit.
If you apply Russell Brunson’s principle what this means is that you can spend up to $2K in advertising to acquire that single customer.
I am simplifying these numbers to make an example.
The whole point of this is to make you aware of the mindset behind some of the most successful marketers and entrepreneurs in the world.
The numbers are not important. The mindset is.
A number that you need to figure out is what % of new customers turn into a referral?
If you understand this number you can understand the true value of a single customer to your business.
In commercial roofing, a single customer can potentially generate millions in revenue for a business.
For example, a property manager can potentially refer you dozens of customers.
The commercial marketing game is not about volume but about quality.
If you view marketing as an investment your mindset will change.
You will understand there will be wins and losses but the result won’t stop you from doing what have to do.
A roofing business is a marketing company that sells roofs.
If you believe this you will do whatever it takes to figure this out.
You won’t stop marketing because of a bad result.
You will learn digital marketing even though you are not “technical”
You won’t stop trying to understand what makes your customers say yes to you.
Have you ever conducted customer interviews and asked them why they bought your services?
This type of feedback is gold for your business.
In the U.S. recessions from 1980-1985, McGraw-Hill Research analyzed 600 companies. The businesses who continued advertising and outspent their competition during the 1981-1982 recession hit a 256 percent growth by 1985.
This stat shows you that the companies that are advertising and getting new customers, as a result, will always beat the business who stop advertising.
In simple terms, the company that is willing to spend the most to acquire a single customer wins in the long run.
Let’s give over an example to illustrate this.
There are two roofing companies in Tulsa.
Company A and Company B.
Company B is much older than Company A.
They are both about the same size. They each do about 2 Million per year and about 150 roofs/year.
They each spend about $50,000 in advertising per year.
Company A decides to commit and invest heavily in their marketing the following year.
They spend $100,000 the next year and company B stays the same at $50,000.
Company A decides to take an iterative approach to their marketing. They experiment with many different channels to figure what works best.
They take the long-term view and understand that marketing is always changing.
They are trying to figure out what works best and provides the highest ROI.
Company A has a successful year and as a result of the increased advertising completes 175 roofs. Company B stays the same and does 150 roofs for the year.
Company A actually makes less profit than company B because it took them a few months to get their marketing to break even.
Even in the winter, they did not stop their advertising even though they couldn’t work on a roof.
The following year Company A decides to increase their advertising budget again to $150K but focus more on the channels that got results for their business.
They also decide to invest heavily in their brand.
They create videos, write articles, do interviews on podcasts, etc…
By the end of the year, they’ve doubled their business to 300 roofs and even increased their profit margins.
Company A is now double the size of Company B.
Company B is wondering how in 2 years they’ve lost so much ground to the competition.
Company B viewed marketing as a cost like an office rent or office supplies.
Company A viewed marketing as an investment.
They took the long term view of their business and visualized where they wanted to be in a couple of years.
One of the things that company B failed to understand is that they are a lot of hidden benefits to marketing as aggressively as company A did.
Besides the direct customers that you get from your advertising, you also get a lot of referrals as the result of these new customers.
Referrals are the holy grail of leads.
The main reason why you want to break even with your marketing investment is so you can generate more referrals from your new customers.
Referrals are always going to be the highest quality leads.
Referrals are the easiest to convert and pay you the most.
The whole goal is to create an online customer acquisition system that consistently generates new leads that will turn into new customers that will turn into more referrals.
Branding is more important than ever
Everything today has become a commodity.
A consumer has literally thousands of choices with a few clicks on their phones.
A savvy consumer can immediately look at your reviews and get an idea of the type of company by just doing a few searches.
This is why it’s more important than ever to build a brand.
When you invest in your brand you will no longer be perceived as a commodity.
When you are seen as a commodity you wave the white flag and surrender to the momentum of the marketplace.
The construction industry is booming today which makes easy to overlook this critical factor.
Building a brand is about securing the long-term value of your business.
The benefits of good branding are enormous.
You can charge premium prices.
Your selling will be easier.
Referrals will be easier to generate.
It will be easier to recruit new employees.
If you are breaking even with your marketing you are fortunate.
The vast majority of marketing campaigns fail.
Once you’ve broken even with your market you can focus on optimizing the two main drives of your customer which are customer acquisition and customer lifetime value.
What do you think?
Are you breaking even with your marketing?