- Hey everyone, it's Neil Patel here
for another q and a Thursday video.
I'm here with Adam LoDolce from Viewership.
- Hello everybody.
- And this week's question is...
- This is from Sagar Sangam.
Thank you for your comment and your question,
and this is a simple one, but I'm really interested
to get Neil's opinion.
How do you decide a marketing budget?
For a startup, it's hard to convince his boss
to invest in marketing.
- As a startup, you should invest only small amounts
of money on marketing.
I understand as a startup you need to invest to grow.
If you're venture funded, that's a whole different story.
Based on the question, it looks like there wasn't a ton
of money there, so what I would do is as a startup,
I would run small experiments.
50 bucks, 100 bucks, a lot of little ones,
until you find things that are working and getting traction.
That traction, whatever that marketing effort is,
it doesn't have to be profitable.
More so, you just have to be getting traction from it.
So if it's driving a lot of traffic
and sales, even if it's not profitable yet,
but you can see how you can fine-tune,
improve your convergence, eventually make
it profitable, cool.
Double down on the ones that have potential.
The ones that don't, put 'em off to the side,
don't bother your time spending trying to tweak
or modify 'em, just go after the ones
that are already showing somewhat of a traction,
double down on 'em, grow 'em, get 'em profitable,
and then when your boss will say
if something's profitable, he won't be like,
"Hmm, I don't know if you should spend 10 grand
"or 100 grand."
If you're spending a dollar, making two dollars
for every dollar you spend, you're boss is gonna be like,
"How much can you spend?"
'Cause you pay your credit cards 30 days later,
so it's not like your expenses are hitting you up front.
A lot of times, your cash is coming up front.
If it's not, but a total of the lifetime value
of the customer, if it's profitable,
you can easily get investor dollars.
VCs will gladly write a check
if you've already figured out the economics
and your marketing and scaling it up.
So as a startup, you shouldn't have crazy marketing budgets.
It's not about, "This quarter we're gonna spend this.
"Next quarter we're gonna spend that."
You're venture funded, sure you can try all that stuff out,
and have your quarterly budgets,
but as a startup that's bootstrapped
or with very little money,
go and just run very tiny experiments with very little cash.
From there, you'll figure out what's working.
Double down on that.
All the stuff that's not working,
come back to it later on, maybe six months
or a year from now.
- Yeah, I think that's genius,
and one number that I've always looked at a lot
in my business, whenever I think
about especially pay-per-click advertising,
how much money to put into that, is how quickly
can you recoup that money.
Like Neil said, if it can be done
within 30 days, that's amazing.
Just recoup the money and keep reinvesting,
and then before you know it, within a year,
you've built a really big business,
but if you can get that done in seven days,
then just sky's the limit.
- One of your startups sells info products.
- Correct.
- For every dollar you spend on Facebook ads,
what's your return?
- About a dollar 90 within seven days, but--
- A dollar 90 in profit, or a dollar 90 in revenue?
- A dollar 90 in revenue, but that's within seven days,
and that's not even long-term value (mumbles).
- Okay, so, conservatively, after credit card fees,
refunds, et cetera, over the lifetime value
of the customer, it's easily a dollar in profit.
Would you agree?
- It's more than that, but yeah, easily.
- Okay, so, if I said, "Tomorrow you can spend
"a million bucks," would you spend a million bucks
on your credit card?
- Well the, (laughs) potentially,
but as you scale, those numbers change, right?
- That's correct.
- That's the problem.
- But in general, if you could--
- In general, of course, yeah.
- Yeah, and even if you don't have a million bucks
in your bank account, you could,
as you're getting the money back in seven days,
you can pay down your credit card,
and keep it going as much as possible 'til you scale it up.
- Exactly.
- And that's the thing, it's go
and just push the pedal as far as you can,
go really hard as long as it's profitable.
The moment things start slowing down,
that's when you should slow down your budgets--
- Slow it down.
- But your budgets should be determined on how much money
or revenue can a marketing channel generate,
not necessarily what do you want to map out for the quarter,
because if you can spend double the amount of money
and make double, triple, the amount of income,
that is highly profitable, go for it.
- Definitely, and I think that comes
to one point with all of this is is it trackable?
Right, like I use this awesome tool called Wicked Reports,
which'll tell me exactly, for every person
that clicks on an ad, how much that's worth
in the long term, not just like with Facebook pixels
or Adware's pixels, long-term value,
that is incredibly important,
but it can be tricky with other types
of marketing like billboard marketing, right? (laughs)
I don't know if anyone does billboards.
That's a trickier question. - They do.
We see 'em everywhere, right?
- Yeah, right, (laughs), 'cause people still do it,
but are they just burning their money?
- I think they work.
- Yeah.
- I believe in rule of seven.
Someone sees a marketing message seven times,
it works well.
- You wanna, okay, let me ask you a question.
If you were to get a credit card,
what brand would you go to?
- Am Ex.
- Okay, if you want shoes, where would you go to buy shoes?
- Probably Aldo, I guess, I don't know.
- Okay, um...
- (laughs) I don't really buy that many shoes.
- Okay, if you need to buy workout gear, what?
- Nike, yeah.
- Okay, if you wanna buy a car?
- Uh, man, I don't know,
Tesla probably?
- Okay, would you Google (Adam laughs)
for any of these things?
- No.
- It's just the brands.
- Yeah, yeah.
- We see 'em everywhere.
That's the value of branding,
that's the value of doing billboards,
television ads, creating press.
It's really hard to track, easier for larger corporations
'cause they have huge budgets like the Geicos of the world
where you see all their television ads.
I think they spend over 100 million a year on TV ads.
- That's incredible.
- It's harder for us startups,
but for large corporations, branding's important.
- It's huge.
So there you have it.
Alright, so marketing budgets,
explained to the best of our ability (laughs) on that one.
- There you go, you have a question,
you want a answer, next week's q and a Thursday video.
Leave a comment below, I'll answer it,
and it may show up on next week's video.
In addition to that, please like, share, comment, subscribe.
Appreciate you guys watching.
Thank you.