Managing Ad Spend in Competitive Markets

Hey guys, Damian here from Master of One Marketing. Lately, I’ve been talking to clients about ad spending—whether it’s LSAs, Google Ads, or Instagram Ads—and I wanted to share a few key things to keep in mind when diving into advertising.

I’ve mentioned this in previous blogs, but it’s worth repeating because it’s critical for businesses of all sizes. The first thing to remember is the 10% rule. Essentially, you want to dedicate 10% of your income—after covering all expenses—toward marketing. This ensures you’re investing enough to grow your brand without overextending yourself.

If you find that 10% is too high for your business, that’s a red flag that maybe you’re not ready to hire a marketing agency just yet. However, this doesn’t mean you can’t do marketing—it just means that you might need to start with more cost-effective solutions or even manage some marketing in-house.

Consider Your Competition

The next thing to think about is your competition. Specifically, how many competitors in your space are running ads? It’s vital to know because if you’re in a highly competitive industry like e-commerce, software, or professional services, you need to be prepared for your competitors to have deeper pockets.

Your competitors’ 10% marketing budget might be much larger than yours, which means they can outspend you on ads. Knowing this upfront allows you to strategize better and find ways to be more efficient with your spend.

Budget vs. Spend

Lastly, let’s talk about budget and actual spend. Say you’ve set aside $10,000 a month for ads. It’s important to manage that spend carefully. For example, if you’re running Google Ads, you may want to spend $2,000 to $2,500 per week to ensure consistent coverage throughout the month.

Your overall budget needs to signal to Google that you have the resources to invest in ads, even if your actual spend will be lower. However, this strategy only works if someone is actively managing your ads. You don’t want to set a $100,000 budget but only plan to spend $10,000—and then accidentally end up spending that full $100,000.

While you can automate caps on spend, showing activity is important for Google’s algorithm. It signals that your business is serious about advertising. This is especially critical with local service ads (LSAs), where competition can be fierce. For instance, if you’re a realtor or in legal services, LSAs may not guarantee that you’ll be shown on page one, no matter how much you spend.

The Pitfalls of Pay-to-Play Advertising

A common misconception with pay-to-play advertising is that paying for leads means you’ll get tons of them. That’s not always the case. Sometimes you set a budget, but because your market is so competitive, you don’t get the leads you expected. Or worse, you get leads, but they’re low-quality or unqualified.

Google has systems in place to help with this, but it’s important to manage your expectations and stay informed about how your marketing dollars are being spent. If you’re doing this yourself, be honest about the level of competition you’re facing.

For instance, if you’re a new realtor trying to break into the market with a brand-new website, spending heavily on ads might not deliver an immediate return. There are smarter ways to get your face out there and add value without overspending on ads.

Finding the Right Marketing Channels

I once had a conversation with a friend who runs a pest control company. He was spending a lot of money on billboards, and I told him, “Billboards are great if you’re a lawyer, but for pest control, people are just going to Google ‘pest control’ when they need it.” It’s important to align your marketing spend with the way customers actually find services like yours.

The same principle applies to services like electrical work or plumbing. No matter how memorable your billboard is, people will still turn to Google to find you when they have a problem. That’s why it’s crucial to invest in marketing elements like SEO and ads, which actually help people find your business when they need it.

Partner with the Right Marketing Agency

As a business owner, your main focus should be on delivering a great product or service. That’s why it’s important to partner with a marketing agency that knows how to help you navigate your space effectively. Marketing isn’t a one-size-fits-all solution, and your agency should be able to consult with you, be agile, and help you make decisions in real-time.

Your job is to keep providing a great product. If you’re spending all your time trying to oversee marketing efforts, you’re taking away from growing your business. Finding the right agency to handle your marketing efforts ensures that you’re maximizing your budget and getting the best return on investment.

One last thing to keep in mind: if you’re spending a lot of money on marketing, you’re more likely to get a higher-quality account manager from an agency. However, even if you’re spending less and get someone newer, that doesn’t mean they’re not skilled. Agencies typically have teams supporting their account managers, so they have the knowledge to handle your account, regardless of experience level.

Ultimately, the goal of marketing is simple: help people buy your product. So, choose a partner that can help you achieve that goal without stretching yourself too thin.