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Marketing to Drive Profits: What Actually Works for a Small Business

Most small business marketing spending is unmeasured, which means nobody knows which half is wasted. That is the problem worth fixing first.

Marketing to drive profits rather than activity requires two numbers most small businesses do not have: what a customer is worth, and what one costs to acquire. Without them, every decision about spending is a guess, and the guesses tend to favor whatever is most visible.

The two numbers

What a customer is worth. Not the first transaction: the total over the time they stay, after the direct costs of serving them. A café customer spending modest amounts weekly for three years is worth many multiples of a single large order.

What one costs to acquire. Total marketing spending in a period divided by new customers gained in it. Crude, and far more useful than no figure at all.

The relationship between them decides everything. If a customer is worth several hundred dollars and costs thirty to acquire, the correct response is to spend more, not less. If those figures are reversed, no amount of creativity fixes it.

Most small businesses have never calculated either, which is why marketing budgets get set as a percentage of revenue: a method that tells you nothing about whether the spending works.

Start with what is free and unglamorous

For a business people find by location, the highest-return work costs nothing.

Complete the map and search listings. Correct hours including holidays, the right category, photographs, the actual phone number, and the address in the same format everywhere. Incomplete or inconsistent listings are common and they suppress visibility directly.

Respond to reviews. Especially negative ones, calmly and specifically. Prospective customers read the response more closely than the complaint, and a business that answers well is more persuasive than one with no complaints.

Ask for reviews as routine. At the moment of satisfaction, as a step in the process, every time.

A website that answers the questions. What you do, where, when, how much, how to reach you, and evidence you are real. Most small business websites fail on price and hours, which are the two things visitors want most.

Which channels actually work

It depends on how customers currently find you, which is why the measurement comes first. But some patterns are reliable.

Location-based search is the strongest channel for most local businesses, and it is largely won through the free listings, not through advertising.

Referral is the highest-converting source in every service trade and the most neglected. Most businesses that get work by referral have never asked for one.

Repeat business is not usually counted as marketing and should be. Keeping a customer costs a fraction of finding one.

Paid search works where there is clear purchase intent: people searching for the thing you sell in the place you sell it. It is measurable, which is its main advantage over everything else.

Social media works where the product is visual and the audience is local. One account maintained properly beats four neglected, and neglected accounts with old posts and unanswered messages do active harm.

Print, radio and sponsorship are hard to measure and can work for genuinely local businesses with a community identity. Treat them as brand-building, budget them as such, and do not expect attribution.

Measuring without a system

For most small businesses the best measurement tool is a question: how did you hear about us, asked of every new customer and written down. A month of that is more accurate for a local business than most analytics, because it captures the offline sources that no digital tool sees.

The pattern it reveals is nearly always the same in shape: one or two sources produce most of the customers, several produce almost none, and the spending is distributed roughly evenly across all of them.

Price before promotion

Raising a price is the fastest route to profit available to most established businesses, because the increase drops almost entirely through. A five percent rise on a business with a ten percent margin is a fifty percent increase in profit, and it requires no additional customers at all.

Discounting runs the mechanism in reverse and attracts the least loyal customers while doing it. Where a promotion is needed, an introductory offer that converts to full price does far less damage than a permanent reduction, which simply becomes the price.

Marketing that drives profit usually starts here, before any spending is considered at all.

A sequence that works for a small budget

For a business with a few hundred dollars a month and limited time, the order below produces more than spreading the same resources across everything at once.

Month one: fix what is free. Listings complete and consistent, website answering the obvious questions, a routine for asking for reviews, and the how-did-you-hear-about-us question in place. None of this costs money and all of it compounds.

Month two: read what the question tells you. A month of answers shows where customers actually come from. Almost always it is concentrated in one or two places, and almost always the spending is not.

Month three: double the thing that works and stop the things that do not. This is the whole discipline. Most businesses add without reallocating, so a channel that never produced anything continues to consume budget for years alongside the one that does.

Month four: test one new thing, with a way of measuring it. A code, a landing page, a dedicated number, or simply the question again. Untracked tests are indistinguishable from not testing.

Retention is marketing

It is not usually counted as marketing and it should be, because it is the cheapest source of revenue available.

Two mechanisms do most of the work in a small business. Remembering people—a record of who bought what and when, so a follow-up is possible at all. And a reason to come back that is not a discount: a reminder when a service is due, a new line that suits what they bought before, an invitation to something.

Neither requires software beyond a spreadsheet at small scale. What they require is that somebody does it on a schedule, which is the same requirement as everything else on this page.

The one thing worth outsourcing

Most small businesses should do their own marketing, because nobody else understands the customers. The exception is anything technical with a measurable output: search advertising, in particular, where a competent specialist will beat an owner’s part-time effort by enough to cover the fee.

Even then, the owner should own the two numbers at the top of this page. An agency optimizing for clicks while the business has no idea what a customer is worth is a common and expensive arrangement.

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Questions

How much should a small business spend on marketing?

Whatever produces customers at less than they are worth. The percentage-of-revenue rules of thumb are useless without knowing what a customer is worth to you and what one currently costs to acquire.

What is the cheapest marketing for a local business?

The free listings: a complete and maintained business profile on the major map and search services, with correct hours, photographs and responses to reviews. For a business people search for by location, this outperforms paid advertising per dollar by a wide margin.

Do I need a website?

Yes, and a simple one is sufficient: what you do, where you are, how to contact you, prices or a price range, and proof you are real. An expensive site is rarely the constraint on a small business.

How do I know if marketing is working?

Ask every new customer how they found you and write it down. It is unglamorous, it is more accurate than most analytics for a local business, and almost nobody does it.

Is social media worth it?

Where the product is visual and the audience is local, yes. Where it is neither, it consumes time out of proportion to what it returns. One channel maintained properly beats four neglected ones.

What is customer lifetime value?

What a customer is worth in total over the time they stay, not what they spend once. It is the number that decides what you can afford to spend acquiring one, and businesses that have never calculated it are guessing about every marketing decision.

Should I discount to attract customers?

Carefully. A discount attracts the customers most sensitive to price, who are the least likely to stay and the least profitable while they do. Introductory offers that convert to full price work better than permanent discounting, which just resets the price.

How do I get reviews?

By asking, at the moment the customer is most satisfied, and by making it a routine step, not an occasional effort. Responding to negative reviews calmly and specifically matters more than the rating itself.

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