This article shares answers to two questions asked in a Marketing Mastermind Meeting, the monthly online roundtable for Horsesmouth Master Members led by Horsesmouth Editor-in-Chief Sean Bailey and Horsesmouth Associate Editor and marketing expert Devin Kropp.
How much should I be spending on marketing?
Sean Bailey: This is a good question. We hear it all the time. And the answer is that it just depends, right? People say 4% to 10%, 2% to 6%.
I think that this question is more relevant to somebody who is starting in the business and is simply trying to figure out what they should be spending to really grow their business in a significant way. So you have to ask yourself where you are.
Are you in the business-building mode? If you’re in the business building mode, then you’re really going to want to take a deep dive into this whole question. You need to understand your ROI on marketing investments, and take into account the lifetime value of clients.
First of all, when you’re thinking about that budget, remember that your marketing spend obviously needs to be driven toward generating leads that are going to give you customers of a certain type that have a certain value to your firm. That could be from assets or assets under management or other ways you’re paid, for product sales, whatever the case may be. These clients are going to be staying with you, and so you begin to understand the lifetime value of certain clients.
And when we come back to this question about how much money should we be spending on marketing, you have to think about how much you are getting out of those dollars spent. So for instance, in our financial educator program, we talk about doing webinars as well as doing in-person presentations, which have an unbelievably fantastic return on investment. So understanding the concept of ROI is really an important part of this broader question of, “How much money should I spend on marketing.”
If I were in business-building mode today, I would be doing at least one webinar per month because they’re so easy to do and so effective. And of course, you can record them and get all sorts of additional marketing collateral out of them. But I would be doing live presentations as well.
And I would be spending money with direct mail houses that understand what’s going on in your zip code, where the pockets of wealth exist, or the kind of wealth that matches up to your own demographic, your own target profile.
For instance, an advisor might spend $7,500, even $10,000, to do a direct mail drop that advertises two or three educational events. Sometimes at a restaurant, sometimes at a neutral location, even your office. Sometimes it may be two live events and one webinar. But in any case, you’re advertising three events with a direct mail house that knows your demographic and your zip code very well.
So you spend that $7,500, even $10,000, and you understand how to calculate the ROI. For that $7,500 spend, you’re actually putting on three events and you know what you’re anticipating: attendance is going to be 15, 20 households for a total of 30, 35 people per event.
Ideally, you do this on a regular basis because you’re making this a habit of putting on these kinds of in-person presentations. So you have a good idea how many people are going to come in for a one-on-one meeting with you afterward. You know how many of those you can convert, and what your baseline AUM is per household. And then you run the numbers.
And let me tell you, when it comes to return on investment, for that $7,500 advisors will get 500%, 600%, 800%, 900% return on that investment in the first year. And that’s not even accounting for things like understanding the lifetime value of your client, as I mentioned above.
Can you do a direct mailing of postcards without offering a dinner or gift card?
An advisor recounted that when working with LeadingResponse, he wanted to do direct mail without offering food: “And they were so appalled when I wanted to do a webinar without offering food, they said they wouldn’t even do the mailing. But I thought it would work. So I did not do one with them because they were not happy about the idea of doing a mailing for a webinar without giving out a DoorDash gift card.”
Sean Bailey: So here’s the thing, the salespeople at LeadingResponse are trained in this particular model that they absolutely know works. And so when you tell them you don’t want to do food, they just dig in. Four years ago now, because it was the year before the pandemic, we were working with a guy out of Wisconsin; he just moved from being a bank rep to being on his own more or less. And I hooked him up with LeadingResponse, at the time they were called RME360. Well, he didn’t want to do the dinner. And I said, “Well, that’s fine because their marketing, they’ve got the listing thing down, they’ll get people to turn out.” But he ran into the same resistance you did.
And I just said, “Look, push back, dig in and tell me you’re not going to make too much of a big deal out of it. But you don’t want to do dinners. You’ve got a great neutral location.” I think it might have been a library. And he did, and they relented.
And here’s the thing, this advisor had really never done this sort of thing before. He was doing a Social Security workshop at this neutral space that he had rented for like 300 or 400 bucks a night. And so LeadingEdge was doing the marketing, a direct mail drop to like 7,500 names.
I told him, “I know this is going to sound crazy, but you need to be prepared for the possibility that when this marketing piece hits, you will get such a good response that you’re filled up. You have this room where you only can handle like 25 people. You need to schedule with that space a third backup date because I’m concerned that your response might be so great that you’re going to have to use that third date.”
He was like, “What? Come on. Are you serious?”
I said, “Yeah, please just go ahead and do it.”
And sure enough, the marketing piece was hitting his targeted zip codes on a Thursday and a Friday. When he came into the office on Monday, both those dates in the advertising thing were totally filled up and he was immediately still getting people and putting them into the third place!
So, yes, I do know people who have done pure webinars or a hybrid of in-person and webinars on their advertising. And I don’t know the answer as to whether the subtracting of the food has any impact. So, you would definitely have to look into that. I do believe that the direct mail can get people to come to webinars, probably also without necessarily needing the gift card thing. But maybe there’s some other way. Maybe there’s something else, some other enticement.