MLMT 227: How To Allocate Your Advertising Budget
MLM Trigger Episode #227
We talked about why paid traffic is an investment worth making. Today let’s answer the #1 question related to how much money you will need to budget to actually run ads.
How much you should spend on advertising for your MLM business?
When it comes to ad spend, there isn't a perfect answer for your business. But let’s walkthrough a framework to help you decide on what you can spend on advertising.
First you should ask yourself these questions and answer them one by one:
How much investment is needed in order to hit my income goals?
Of course, the primary goal for every business is to generate sustainable long-term income growth. That's why, when determining how much to invest in advertising, you should work backward from your income goals.
Working backward can help you determine how much revenue your ads are responsible for bringing in. Which will help you on how much investment you need to make that GOAL REALITY.
For every $1 you spend on ads, how much is coming back in sales revenue?
Look at your Return On Investment. Let’s say that for every $1 advertising dollar you invest, you make $2.50. That a great return and a great goal to have in mind.
Start small and test. Testing is important to determine which ad sets are most profitable, so you don’t waste money on inefficient or ineffective ads.
[How To Allocate Your Advertising Budget]
What percentage of my marketing budget can I realistically afford to spend?
It's a difficult question to answer honestly, but you need to ask yourself:
"How much money do I actually have?" That's why it's important to start with a budget that you're comfortable with and can commit to in the long-run.
But don't worry — even if you have a limited budget, that doesn't mean you can't use paid media as part of your greater marketing mix. But you want to get the most out of each and every advertising dollar that you spend.
What is the lifetime value of my average customer or associate?
Lifetime value is a prediction of the profit of the entire future relationship with a customer or associate. The lifetime value answers how much money you will make from a single customer over time.
For example, if your average customer get you an income of $500 a year and stays with the company for two years, we can say the average lifetime value of that customer is $1,000.
But if you factor in that it costs you $50 to acquire that customer over their entire lifetime as a customer, you can say the average lifetime value of your customer is $1,000 minus $50, or $950. Now, the higher your lifetime value, the more money you can realistically spend to acquire a new customer. If you're feeling short of money for advertising, consider taking steps to increase your customer's Lifetime value.
How well am I converting website visitors into leads and leads into customers?
Now that you have an average lifetime value for your customers, you can work your way backward to see what your monthly advertising budget should be.
You'll want to consider two things to figure out your advertising budget.
Your average conversion rate: The rate at which website visitors convert and become a lead.
Your average lead-to-customer rate: The rate at which leads become paying customers.
What are these numbers for your MLM business?
Are they lower than you'd like?
It means that your advertising dollars are not being spent as efficiently as they could.
To increase your landing page rate, consider testing your calls-to-action.
And to convert more leads into customers, you can use email automation to nurture your potential customers towards making a purchase.
How much money am I spending on each pay-by-click?
To make the most of your ad spend, you want to bid less than your expected return. Lifetime Value, conversion rate, and lead-to-customer rate can be used to determine what your maximum bid should be using this equation.
Maximum Ad Spend = Lifetime Value MULTIPLY Conversion Rate MULTIPLY Lead-to-Customer Rate.
A word of advice: I'd recommend reevaluating your spend ads on a quarterly basis. That way, your campaigns will have enough time to bring in reliable results and you'll have enough time to adjust your investment accordingly to meet your goals.
May you be wealthier,
--Corine--
The top producers in MLM don't make a list of 200 people, don't do home meetings or anything like that. They use something equivalent of a sales funnels.