Getting the Right Ratio for Your Marketing Spend

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report by Econsultancy highlights a significant issue for digital marketers: most companies operate at a 92:1 ratio. In other words, for every $92 businesses spend driving traffic to their websites, they only spend $1 converting it. Through anecdotal evidence from speaking daily with companies around the world about their digital marketing efforts, I can tell you that not much has changed since this report came out in 2011.

It’s an incredible statistic. And it speaks to the attention we are still paying to the top of the sales funnel (getting the pipeline filled) while spending relatively little time and resources worrying about converting customers as efficiently as possible once we’ve got their attention.

Of course, driving traffic to your website is critical and a fundamental requirement for any organization. However, diverting some of the marketing funds to the bottom of the funnel can help drive increased sales revenue and significantly improve your ROI. The key is getting the ratio between driving traffic and converting just right.

Below is an example of what I’m talking about:

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As you can see, changes to your budgets shouldn’t be made arbitrarily. Diverting funds to the bottom of the funnel to improve conversions will help drive more sales, revenue and improve the overall ROI of your marketing campaigns. But if you look closely at the above chart you can see that there also comes a tipping point where spending more on optimizing is no longer helping.

In this example the optimal figure is around the 70/30. If you look at the 60/40 example you will see that the ROI begins to decrease. There are only a certain number of things you can test on the presentation layer before you hit the point at which the cost outweighs the benefits.

So getting the balance between lead generation and optimization is crucial.

– Bob Dufour