How to Set Your Suit Business Marketing Budget the right way

Let's get real about your marketing budget for more selling suits through the internet. One thing I hear all the time is, "I’ll pay $X per client that buys my $Y suit."

Sounds perfect, right? Zero risk, only pay for results.

Well, hold on. While that sounds great in theory, marketing agencies love using this analogy because it makes selling the dream to you easier. But often, it turns into a cash flow nightmare.

While this might sound like the best option and is the most taught one in MBAs and academia, it only works in theory.

Why Pay-Per-Sale is a Fantasy

This method assumes marketers have some magical power to create demand out of thin air and give you clients as a commodity. Many have tried, most have failed. Pay per sale only works when there are:

1. Massive demand exceeding supply
2. Impulse buying decisions associated with product
3. No risk for the buyer
4. Huge lifetime value and profit margin for a company

Plus, the commission per sale has to be large enough to offset the risk for the service provider, making it not so appealing to you as it often exceeds the % that would keep you profitable.

In our industry, where buying a suit is an emotional decision that sometimes can take months, this model just doesn’t fit.

The Question I Get All the Time: "What Budget Do I Need to Get Results?"

This also assumes the marketer has a crystal ball. Spoiler alert: they don’t, otherwise instead of writing this article I would be buying lottery tickets and sipping margaritas in Hawaii.

The concept of fixed budgets should only be used for big companies with slow decision-making processes, not agile-suit businesses, otherwise, you would be throwing away your competitive advantage and expose your cash flow to some risks.

The Real Bottleneck

Those outdated mental models are the most common bottlenecks I have seen throughout my career that stop suit businesses from making online marketing profitable. Let’s get into some examples to show why the traditional approach doesn’t work.

Example 1: Affordable Ready-to-Wear (R2W) Suits

Let’s say you sell R2W suits for $150. Industry averages suggest you should spend 8-15% of the product price on marketing. Let’s go with 10%, so $15 per suit.

With an average cost per click in the US exceeding $1, you can get only 15 clicks per $15.

Most web pages convert at about 1-2%, so you need 50-100 visitors to make a sale.

The math just doesn’t work out.

Example 2: High-End Bespoke Suits

You sell bespoke suits for $5,000 and want to spend no more than $500 per client.

The risk here is in the understanding of how statistics work.

Most business owners want to believe that after spending 499$ that final dollar will make your client pop up. In reality, the averages are shown in larger data sets.

So a real-life example in a bespoke segment could look like this: you spend 2800$ with no sales, and only then 6 clients could pop up. Average math works out and you would make a good profit, but if we were to judge results only after the initial 2000$ is spent you would deem this campaign a failure and stop.

To make matters worse the 500$ per sale is not a minimum benchmark. It is the goal that marketing has to achieve by finding the best market fit by running lots of tests that need volume to carry statistical significance, and initial results will always be way higher “per suit sold”.

To summarise this point, bespoke is doomed to take a leap of faith by spending a lot of money in the hope of it starting to work out at some moment.

The Reality of Pay-Per-Result framework

The limiting factors in the pay-per-result framework are math, cashflow risks, and stress tolerance of the business owner. This approach puts you in a situation where there is no way to succeed.

How to win?

Einstein said, “You can’t solve a problem with the same thinking that created it.” To make online marketing work, we need a new, better paradigm so let's make it.

Recap the issues

• Generating the data we need for improvements to make it profitable and scalable takes time and money and almost always in the beginning it is a cost and not an investment.
• Attributing the sale to a specific activity is getting more complicated due to the decision-making time exceeding the timeframe that modern tracking tools can provide.
• The buying decision process can't be framed as an impulsive commodity.
• Set budgets and KPIs are not connected to reality and your cashflow exposing it to risk
• Stress tolerance of a business owner
• Math doesn't work out in isolated instances of direct purchase from the ad

Solution outline

We have to shift away from the “buy a client” approach and move towards “buy attention in incrementally better ways”.

• Abandon the transactional nature of the direct sale, and see the budget as a tool that helps potential clients make a buying decision.
• As we can't attribute the sale to specific marketing activity and isolate it, numbers will never work out for a suit directly sold from the ad. We have to view the marketing budget's return on investment compared to overall company revenue changes
• Decrease the stress that causes the owner to throw in the towel too soon
• Avoid biases of other parties (marketing agencies/freelancers) to make you spend more than is necessary, to protect your cash flow.
• Take the seasonality of the suit industry
• Allow the budget to be the driver of revenue growth
• Follow the “Kaizen“ approach of small incremental growth over a long period of time

The Final Solution

To follow all of the points mentioned we recommend all of our clients base their budgets on the % of the previous month's revenue.

The first step is to determine a % of overall revenue to be spent on marketing that doesn't cause stress to the business owner long term but is significant enough to move the needle so that marketing activities have breathing room and time to improve and become more efficient.

Based on our experience:

• 5% is a bare minimum for businesses that just want to stay afloat and fight inflation/fixed cost increase
• 8-10% for a steady growth
• 15-25% aggressive growth (only applied if there is enough cash in the war chest and the business backend can manage the growth in demand).

The size of % will not determine the results but the speed at which one gets to them.

For those who can't stomach the idea of saying goodbye to a certain % of their revenue forever, i can only give this example:

If you don't spend anything on marketing you will be getting 100% of a small pie, but if you decide to view marketing as a tool that scales your growth, for a while you decrease your profits, but it allows you to grow the size of the pie.

90% of 1000 is a great deal over 100% of 100.

Only when you make peace with spending X% of your revenue on marketing forever does the playground for growth become available.

The beauty of the approach

This approach carries multiple upsides:

• You only spend more if you make more and this forces the executing party to drive results instead of shifting to other ideas.
• Your cash flow is safe. If you had a great month, you have more money to ensure that the next one is also better.
• During quiet months you are not forced to spend more than necessary, but even with the smaller budget, you are still in the game, making sure that next month gets some positive momentum, or if your marketing budget is too small to be in the game, at least keep it away to add to your next good month.
• This approach gives room for constant improvement, so each month your ROAS will be a bit better, and given time, you will start seeing the overall revenue grow, which will free more budget to reach more people, therefore starting the snowball effect, where you spend more because you make more.

Following this framework I can guarantee that your year-over-year revenue will keep growing as in a year you will have the same % of ad spend budget, but due to the improvements in the efficiency of your efforts, you will be getting more results.

Determine a % and stick to it forever. Make it work over time.

Shameless plug:

If you want to minimize the time until this works out, you need to be efficient in your efforts. With the experience of scaling our own suit store over 15X in revenue and over $7 million in managed ad budgets for our suit industry clients worldwide, we can be your shortcut.

If you want to grow your suit sales as fast as possible, shoot me a DM on LinkedIn or schedule a free consultation (if times are available) here:

https://calendly.com/sartorialdigital/45min

to see if we can help you on your sartorial mission.

To your success

Andris