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Beware Of This Marketing Trap

President/CEO of Joseph’s Premier Real Estate; professor of finance, business, real estate at IRSC; author of Madness, Miracles, Millions.

If you run a small business, you’re bound to receive marketing solicitations from random salespeople. I receive pitches on a new product or service multiple times per week.

One of the most common pitches is for social media advertising, designed to increase sales by reaching new customers through digital channels. A salesperson will reach out claiming to have expertise on Facebook, Google and Twitter advertising, which could, theoretically, be used to boost sales by X percent or Y dollars.

While more than three-quarters of small businesses use social media for key business functions, it remains a blind spot for many small business owners who would rather focus on other business needs, such as recruiting and training. Therefore, small business owners are all too willing to outsource digital advertising to “experts” who claim to leverage social media productively while small business owners tend to other needs. Nearly 30% of small businesses, for example, work with a digital agency to maintain their social media accounts.

Tread cautiously. There are countless marketing traps out there, so you need to be careful. If you’re outsourcing social media advertising, it is imperative for your small business to be on the same page as the agency. Craft talking points and stick to them. Your key messages and the agency’s key messages should be one and the same, so your small business has one voice. The goals and objectives, in addition to the strategies and tactics that execute them, should be the same as well.

When you get to the execution stage, you need to track return on investment. There is no better metric for success. In digital terms, conversion is king. I can’t repeat it enough: Conversion, conversion, conversion. What are your social media campaigns actually getting you?

In the end, what matters for any small business is sales, income, revenue. So, track it. If you spend $100 on boosting or geofencing a social media post and it brings you $3 in revenue, you have lost $97 for your small business. If you gain a customer, it’s important to calculate that customer’s lifetime spend, assuming a certain attrition rate. Let’s say the customer spends $3 a year: Given the original $100 investment, it would take you 33 years just to break even.

Put another way, you don’t want your customer acquisition costs to be too high. You want your social media-based customer acquisition costs to be as low as possible while introducing your small business to high-quality consumers (i.e., repeat buyers). That way, you are increasing sales without spending inordinate amounts on digital ads. Find campaigns that bring those costs down, guaranteeing a high return on investment.

If you have $100 to spend and it costs $20 to acquire a customer, ask yourself: Is that customer worth it? Does acquiring five customers for $100 make sense? Depending on your business and the value of a typical sale, it may be worthwhile. But, on the other hand, you may be wasting money.

You should also be wary of marketing pitches that suggest it takes months for advertising to become effective. The “branding” buzzword is often thrown around as a way for salespeople to justify themselves by roping you in long term.

Of course, branding is important. If you have the resources, you should brand your product or service across multiple channels, from newspapers and magazines to Instagram. This is called an “integrated marketing strategy,” and it does work. But nebulous “branding” offers from salespeople can distract you from the task at hand.

It’s also important to understand the landscape. In the online world, there are countless companies competing for the attention of consumers. You can run million-dollar campaigns and be forgotten after one day (also known as “day-after recall”). My advice is to test each of your channels one by one so you can determine which one works best for your product or service. It may be a billboard or it may be Snapchat.

If you’re working with an agency, you can even ask if they will charge you per product or service sold through the use of a “user code.” If the agency believes in their offerings, they shouldn’t balk at the offer. The best agencies bet on themselves.

In today’s day and age, with the U.S. economy recovering from the Covid-19 pandemic and small businesses continuing to struggle, every dollar counts. However sexy it sounds, there is an opportunity cost to digital advertising: $100 wasted on Facebook, for instance, is $100 not spent on hiring or research and development. 

So, if you get sold by an effective marketer, have that salesperson explain ROI and conversion in specific terms. There is too much at stake for vague generalities. You deserve to know the expected sales boost if you target a certain demographic group or advertise to a specific geographic area.

Beware the marketing trap. Don’t be the easy sell, and do your due diligence.


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