The question is a perennial one: how much should we be spending on our marketing?
The textbooks tell us we have to look at a whole range of factors for the answer, from the business's lifecycle stage to the extent of its ambition and the competitiveness of the market it operates in.
But whatever the logic of any calculation, there is often a huge disconnect between how much should be spent and how much is actually spent, invariably because of nervousness and a lack of conviction by the business owners and senior management.
Alternative Finance provides us with a fascinating case study. Here, we have a young industry with many businesses still searching for critical mass. The ambitions are huge, but so too are the anxieties of the founders who are desperate not to run out of cash before the break-through revenues start rolling in.
Here's the thing. If we want our AltFi and FinTech businesses to scale and compete on a national or international scale, there has to be an unremitting commitment to sales and marketing. Nobody will choose a platform if they don't know it exists, understand what it offers and trust it to deliver. For our reference points we only have to look across the pond.
Lending Club - now 8 years old and with $ 4bn of lending under its belt - will spend 63% of its total operating expenditure on marketing in 2015. That's a cool $ 175m. What's more, only $ 40m of that is earmarked as 'discretionary'. The rest is firmly committed to be spent on the sort of persistent, metronomic marketing that will keep the Lending Club name in front of its target audience and make sure it's a firm choice for any borrower looking for a loan and lender looking to invest.
Does it work? Growth for Lending Club in the past 12m has been 100% - from $ 2bn to $ 4bn.
The good news for platforms that might not have Lending Club style budgets is that new media and data sources are rapidly driving down the costs of acquisition. Even on a relatively small budget, a broad reach can be achieved. The average cost to reach 1,000 people in a newspaper is around £32. Reaching an equivalent audience via Facebook is about 25p and there are many other options in between. We can also improve the results with increasing amounts of data-driven personalisation.
And here's more good news. Because of alternative finance's ability to harness technology and the Internet, operating costs are 60% lower than traditional finance providers. That means providers can spend proportionally more of their total spend on sales and marketing and punch above their weight in the process.
Of course, simply throwing money at the problem is rarely a solution and it's not the case in marketing peer-to-peer either. To assess and make a return, AltFi businesses needs to become disciples of multi-phased testing and analysis; relentlessly testing, measuring and adapting before they find the formula that works and burst forward with explosive growth.
Liberum estimates that market place lending in the UK will increase from £2bn to £7bn between 2014 and 2016. In the US, it is forecast to grow from $ 6bn to $ 33bn in the same period. That's incredible growth and means P2P will break out of its early adopter phase and into mass market acceptance in the next two years. The business is out there for those with the confidence to commit to the necessary marketing to grab it.
Will Prosper and Lending Club be using their operating budgets to tinker under the bonnet of their technologies? The hell they won't. They'll be out there spending marketing dollars, grabbing market share and shedding few tears for any competitors that disappear beneath the waves while they do it. Don't be one of them.