Pay to Get Paid 🤑
Paid Growth is one of the most exciting—and most *expensive—*growth models you can apply to your business.
At face value, Paid Growth is very simple. You pay a fee to feature your business in front of your target customer, in the form of a sponsorship or ad.
If you get this right, you've struck gold! If you got $2 in revenue for every $1 you spent on Paid Growth, some would call that "printing money" and you would probably spend money as fast as you could so you'd make even more!
Paid Growth is built on the premise that you can pay to reach potential customers who will pay you more than you spent on advertising, but the average Paid Growth campaign has a negative fifty percent Return on Adspend (ROAS).
Unfortunately, Paid Growth isn't always printing money—often it's more like throwing money into your fireplace, warming your house while watching your wealth shrivel and burn.
In 2018, an analytics company called WickedReports reviewed $1.5 Billion in Facebook advertising data and discovered that the average Paid Growth campaign cost more money than it made.
On average, each Paid Growth campaign started with a negative eighty-two percent Return On Adspend (ROAS) and took four months to reach a ROAS of negative fifty percent!
In other words, after four months of optimizing ads each business made $10 for every $20 spent (AKA a bad deal).
Even worse, most Paid Growth agencies don't take into account Cost of Goods Sold (COGS).
Think back to that first example, where you made $2 in revenue for every $1 you spent. What if each product costs you $1 to produce it, is that still a good deal?
No. Instead of "printing money" you're spinning in circles creating products to fulfill orders that pay for themselves with zero profit, when you take COGS and ROAS both into account.
I share these words of caution to inform you, Paid Growth can be incredibly exciting or expensive, so you need to know what you're getting into if you decide to focus on Paid Growth.
How to Succeed with Paid Growth
Knowing the risks, if you're willing to put on a marketing lab coat and run experiments to test and scale your Paid Growth strategy, you have many different mediums and channels to pick from, and the list changes all the time.
You can pick social media as your medium and then focus on the channel of LinkedIn, Facebook, or TikTok—depending on which platform is more likely to get you access to your Real People at the end of the day.
If you have a geographically focused business, you could make outside advertising your medium, and pick a channel like billboards where you can test a series of messages to attract your target customer to your business.
Just as well, you could double down on local sponsorships so every charity dinner, golf course map, and Chamber of Commerce meeting includes a reference of gratitude to your business as a benevolent sponsor if that's where your target customer will be.
Whatever medium and channel you focus on, the key to success with Paid Growth is to track your sales from each paid feature so you know which ads are making you money and you can stop paying for the ones where you're losing money (and you will definitely lose money on some).
Remember, your objective here is not to master all five growth models but to reflect on which growth model suits you and your business so you can hyperfocus on that.
Our next lesson focuses on a third growth model, Sticky Growth. That's actually the most complicated Growth Model in most industries, but it's also the most lucrative—so it's worth consideration.