It’s a conjecture-based decision by someone saying,“I’m going to spend 5% of sales on advertising,or $20,000 a month or a quarter or a year.Or,I’m going to give my salesperson a $2,000 a month salary or draw against 3% of gross sales.”
Figure out what a customer is worth to you over a purchasing lifetime−the total aggregate profit that each customer can generate for you,minus all advertising,marketing and service expenses!
If you’ve never run out those numbers,by all means do it soon.The exercise is technically known as reckoning an individual customer’s“marginal net worth”−
The moment you understand what you can afford to spend to acquire a new customer based on what that customer will be worth to your business or practice in terms of profits in transaction one in year one,and in subsequent years,you will stop wasting money on advertising start only investing in sales generated.