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Investment decisions

What I check before increasing a marketing budget.

A channel can look efficient at its current budget and still be a poor place to put the next dollar. The decision starts with what the business needs to earn from that additional investment.

3 min read · Interactive example

Before recommending more spend, I want to know what is limiting growth. It could be reach. It could also be an offer that is hard to understand, a landing page that loses people, or a sales team that cannot follow up quickly enough. More traffic changes the size of those problems.

Start with the economics.

A platform return does not tell me what the business keeps. I look at the costs behind the sale, the quality of the customer, and the assumptions about repeat purchases. If the plan depends on future customer value, I want to know how much of that value is observed and how much is a forecast.

Separate the average from the next increment.

Illustrative example, not a company result

What the average leaves out.

Compare two spend levels and the new customers associated with each. Change the example to see what the additional customers cost.

Average before
$100.00
Average after
$120.00
Per additional customer
$200.00

In this example, $5,000 more spend is associated with 25 additional customers. The average cost moves from $100 to $120, while each additional customer costs $200.

The arithmetic alone does not establish what advertising caused. Check comparable periods, customer quality, contribution margin, and payback before changing spend.

Make the next step a decision we can evaluate.

I would set a bounded increase, agree on the business measure, and define what would make us continue, adjust, or stop. The observation period needs to fit the buying cycle. A long sales process will not produce a useful answer overnight.

There also needs to be someone responsible for acting on the result. A test with no decision attached is just more activity.

My question is simple: what evidence would make the next investment a good decision?