Value Added Ep. 23 – Put Your Eggs In Fewer Baskets
In this week’s episode, Jonathan and Jarod get to grips with a concept all entrepreneurs grapple with: diversification.
Diversifying your business is usually considered a positive thing…
After all, isn’t “having all your eggs in one basket” a huge risk?
It certainly can be.
If you’re overly dependent on one or two clients for the bulk of your revenue, you could be hung out to dry if one of those customers moves on.
Diversifying your sources of revenue is almost always a good idea — just ask any affiliate marketer whose website was monetized 100% through Amazon…
When Amazon drastically slashed commissions in April 2020, many affiliates saw their revenue cut in half (or less) virtually overnight.
But, is it possible to put your eggs in too many baskets?
When it comes to marketing, the answer is a resounding yes.
What are the dangers of spreading yourself too thin — and what can you do to prevent it?
KEY TAKEAWAYS
- According to Jonathan, entrepreneurs fall prey to three primary pitfalls by trying to spin too many marketing plates:
- Lack of education
- Misinformation from service providers
- FOMO – Fear of missing out on a hot new platform (How’s that Tik Tok campaign coming along, by the way?)
- Stay in your lane. Don’t rush to or feel obligated to create content for or embrace every new platform that comes along. If you’re a lawyer, for example, do you really need an Instagram or Pinterest presence?
- Resist the temptation to throw a bunch of shit at the wall just to see what sticks.
“Most small businesses don’t know how to run a successful marketing campaign.
Instead of learning how to run one campaign, they start 10 unsuccessful campaigns and call it diversification.” – Jarod Spiewak
- Unless you already know what you’re doing, nail one marketing channel at a time before investing in another. Advertising is a great example. If you lack experience, don’t invest in Google and Facebook ad campaigns at the same time. Get one or the other right before throwing money at ads.
- Beware of service providers who tell you that you need to do everything at once when it comes to marketing. Most agencies have one or two core competencies but are more than happy to charge you for additional services without necessarily being very good at them.
- If you elect to do your marketing in-house, be cautious about spreading your team too thin. It’s better to do a great job on one or two channels/platforms than do a lousy job at 10.
- If you have a limited marketing budget (who doesn’t?), you can test and iterate ads much faster if you devote your spend to one platform. Spread your budget too thin on multiple channels, and most likely, it’ll take you far longer to see any ROI.
“When you’re dealing with small budgets, diversification in marketing doesn’t make much sense. Spending two or three grand on Google Ads isn’t a lot of money when you’re trying to figure out what’s working and what isn’t. But it’s a bunch of money for most small businesses.” – Jarod Spiewak
- If you’re getting good ROI from one marketing channel — e.g., Facebook or Google Ads — consider doubling down on what already works rather than gambling on adding an additional marketing channel.
“Imagine you own a high street coffee shop, and you have one employee making coffee. You’re making money, but obviously there’s a cap on how many coffees one employee can serve.
What’s the appropriate response? Opening a second shop in another location that sells a different product? Or hiring an additional employee for your existing shop where you’re already seeing success.
Apply this analogy to marketing: the employee represents a specific platform or channel.” – Jonathan Kiekbusch
- Don’t make the mistake of thinking that what works on one platform automagically transfers to another. You might be killing it with your Facebook ads, but that doesn’t mean they’ll convert on LinkedIn.
- Be careful assuming that you’ve capped out in an advertising channel. With Google Ads, for example, you’re far more likely to be constrained by budgetary constraints than by running out of potential customers. If you can spend more money to obtain more conversions in a channel that’s already proven to work for you, think twice about adding an additional platform.
- Don’t fall victim to shiny object syndrome when it comes to marketing channels. Just because you’re making a few grand off Google Ads, that doesn’t mean the time is right to pour your profits into Instagram marketing. Always ask yourself if you could make more money by doubling down on the channels where you’re already seeing success.
- The 80/20 Pareto principle applies just as much to marketing as it does everything else in your business. Rather than over-diversify, spend 80% of your marketing budget on channels that you know deliver positive results.
- Optimization before diversification. If you have a channel that’s showing positive ROI, focus on maximizing your revenue before diversifying to an unproven platform.
- Finding a marketing channel that works for your business takes time, money, and effort. When you find one, squeeze it for all it’s worth. Don’t get ahead of yourself by trying to diversify too early.
- Ultimate takeaway: There’s nothing inherently wrong with diversification in marketing. But too many entrepreneurs get distracted by the prospect of skyrocketing their revenue and conversions by adding additional channels…
Maximize your ROI by investing in what already works. Once you feel you’ve actually maxed out a platform, take baby steps towards exploring complementary channels.
Don’t take your foot off the gas on marketing approaches that are already working in search of growth that may well be illusory.
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