It’s often best to cut your losses than go all in…

There are so many aspects that contribute to the success of a businesses marketing, and thus the business itself. One part of marketing that ALL businesses should do (but sadly don’t) is testing, measuring and optimising.

It’s a simple process. A business tries some new marketing — that could be a whole new marketing method, or a different form of an existing method.

For example — a new marketing method might be Facebook Ads. A different form of an existing method might be different ads on Facebook.

The business puts money into that test to see how well it does. If it doesn’t seem to be producing results at an acceptable cost, a business should stop and try something else. Equally if the test goes well, a business might put more money into it and scale it.

The question is, when should a business stop a certain piece of marketing if it is losing money? There needs to be enough time to test it to see whether it will work, but not given so much time that it burns far too much money.

It’s almost akin to gambling. Many people who gamble and lose money at first, feels it may be worth the risk of losing more if they can possibly make their money back at least.

There isn’t a unilateral answer as to when exactly is best to stop — that’s up to the business to determine how much it’s safely able to risk “burning” to run tests. But there are some signs that will suggest enough is enough and to stop.

  • If a cost per purchase/lead keeps getting higher after a few weeks, that’s a sign that things won’t get better and will only get worse aka costs will only keep rising. Testing is to reveal opportunities and areas for optimisation, and usually results should start improving after the first week or two. If not, get out sooner rather than later.
  • Compare the results to other marketing that is doing a better job. If the tests are showing no sign of being anywhere near as good as other marketing after a while, scrap it.
  • If tests are showing potential, start to upscale it. Your test budget should be small compared to what you’d spend on something you know works. If the test results decline when you start to upscale (spend more) then it suggests the method will only work in small amounts and is not suitable for long term, larger usage.

When testing, a business must be willing to “burn” money for little results. In exchange however, they get data. Data on what works and what doesn’t, which in the long term is more valuable. A business should only test if they’re able and willing to lose money, with the chance of finding something that works really well. And above all, they must know their limits. When to stop, when to accept a loss and avoid the risk of losing even more on something that won’t work.

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