Would You Pass on a Dollar to Save a Nickel?

A business coach called me because she wanted to find a better lead generation service. 

She helps clients find connections on LinkedIn and turn those connections into customers.  

She’d been using a third-party service that worked well… 

TOO well, she said.  

One of her clients had to pause the service because it generated more leads than he could handle.  

Now the coach was looking for a new service for a similar client.

“Why are you looking for a different service?” I asked “That first service seems good.”  

“Cost” said the coach. “They doubled their onboarding fee.”  

The service used to cost $60 to $90 per month, with a $750 onboarding fee.  

Now it costs $60 to $90 per month, with a $1,500 onboarding fee.  

Wow! A 100% price hike. An extra $750 up front. That seems like a lot.  

But I wondered… 

“How much is a new customer worth to your client?” I asked. “What’s the average annual revenue?”  

The coach replied: “About $30,000.”  

Ummmmmm… 

Let’s pause for a moment and play a little game.  

Imagine you have a nickel, and I say, “I’ll give you a dollar for that nickel.”  

Would you do it? (Of course you would.)  

Now, imagine the next day you have a dime, and I say, “I’ll give you a dollar, but this time I want that dime.”  

I’m just guessing here, but I think you would NOT say, “Forget it! That’s twice as much as I paid yesterday.”  

I think you’d take your 90-cent profit every time… 

even if it costs you a nickel more to earn it.  

So…back to the budget-conscious business coach… 

If the service has a proven track record… 

…and customers are worth $30,000 EACH, just in the first year… 

…and it costs only $1,500, plus $60-$90 per month to generate qualified leads… 

…the odds are in her favor! 

I asked her: “If you continue with the twice-as-expensive service, how likely is it that your client will get at least one additional client next year.”  

She replied, “Pretty likely.”  

Spend an additional $750 with confidence that you’ll land at least one additional $30,000? I’ll take those odds every day.  

That’s a decent investment. (And that’s an understatement).  

But some people — MANY people — don’t think of their marketing budget as an investment.  

They don’t calculate the odds. They don’t anticipate profit on the other side.  

They think of marketing as a cost.  

And if a vendor doubles the COST overnight… 

…some buyers decide THAT’S UNACCEPTABLE.  

That’s a fixed-budget mindset. And that’s a mistake.

If you choose to market a business with a fixed-budget mindset… 

…you’ll save lots of nickels… 

…and miss out on lots of dollars. 

You may balance your 5-cent budget, but you won’t grow your profits.