Your Marketing Budget Isn't Too Small. Your Prices Are Too Low.
Every month, a business owner somewhere in Australia looks at their Google Ads dashboard, sighs, and says the same thing: "We just can't compete with the bigger players."
They're spending $3,000 a month. Their competitor is spending $15,000. The competitor gets five times the impressions, dominates the top of the page, and hoovers up the best leads. The maths seems straightforward. More budget equals more leads. More leads equals more growth.
But here's what that business owner rarely considers: the competitor isn't spending more because they're bigger. They're bigger because they can afford to spend more. And the reason they can afford it is one variable that most marketing conversations never touch. Their prices are higher.
The Number That Changes Everything
In June 2026, Les Binet presented new data at Cannes Lions that should have made every small business owner in the country rethink their marketing strategy. Drawing on decades of IPA effectiveness research across thousands of campaigns, Binet showed that 89% of the variation in marketing profit comes from budget size. Only 11% comes from ROI efficiency.
Read that again. Budget is nine times more important than how cleverly you spend it.
This flips the standard conversation on its head. Most businesses obsess over campaign optimisation, bid strategies, audience targeting, and creative testing. Those things matter. But they live in the 11%. The real game is the 89%. And the 89% is determined by how much you can afford to spend. Which is determined by your margins. Which is determined by your prices.
Binet identified what he calls a "death spiral" that traps underpriced businesses: thin margins force budget cuts, which reduce share of voice, which shrinks market share, which drives margins thinner still. We've written before about why spreading your marketing too thin destroys results. The cause of that thinness, more often than not, is sitting in your price list.
The Vicious Cycle Most SMEs Are Stuck In
Here's how it plays out for a typical Australian service business.
| Metric | Underpriced business | Properly priced competitor |
|---|---|---|
| Revenue | $500,000 | $500,000 |
| Net margin | 8% | 18% |
| Annual profit | $40,000 | $90,000 |
| Marketing budget (% of revenue) | 3% ($15,000) | 7% ($35,000) |
| Monthly Google Ads budget | $1,250 | $2,900 |
| Leads per month (at $80 CPL) | 16 | 36 |
| Closes (at 25%) | 4 | 9 |
Same revenue. Same industry. Same conversion rate. But the properly priced business generates more than double the new customers from marketing. Over 12 months, that compounds into a gap that becomes nearly impossible to close. McKinsey's research across the Global 1200 found that a 1% improvement in pricing lifts operating profit by 11% on average, with no change in volume. That's nearly 50% more powerful than an equivalent cost reduction and more than three times more powerful than a 1% volume increase. Pricing is the single highest-leverage variable in any business, and most SMEs spend approximately six hours total thinking about it.
The Uncomfortable Truth: 80-90% of Businesses Are Priced Too Low
This isn't speculation. McKinsey's pricing analysis has been consistent for over 20 years: 80 to 90% of mispriced products and services are priced too low, not too high.
And it's not because business owners don't know their value. A Small Business Expo survey found that only 13.1% of small business owners say low prices are their biggest competitive advantage. 86.2% say it's their service quality, relationships, or expertise. Yet they price as though they're in a commodity market, benchmarking against competitors and adding a thin margin on top.
The gap between how owners describe their value and how they price their value is where most marketing problems actually start.
Why Higher Prices Make Your Marketing Work Better
This is where the psychology gets interesting. Rory Sutherland, Vice Chairman of Ogilvy, has spent decades arguing that pricing is not a rational calculation. It's a signal. And signals change perception in ways that directly affect marketing performance.
Sutherland's most provocative claim: "Sometimes the best way to improve a product is to charge more for it." This isn't cynicism. It's neuroscience. Studies have shown that expensive placebos produce more pain relief than cheap ones, even when the pills are identical. Wine tastes measurably better to drinkers who believe it cost more. Price anchoring increases perceived value by 32% through reference point effects alone.
For a lead-gen business, this plays out in three specific ways:
1. Higher prices filter for better customers. A prospect willing to pay a premium is typically less price-sensitive, more committed to the outcome, easier to work with, and more likely to refer. Your cost to serve drops even as your revenue per customer rises. 2. Higher prices fund better marketing. With thicker margins, you can afford better creative, broader reach, and the sustained presence that Byron Sharp's research shows is essential for building mental availability. Sharp's Ehrenberg-Bass data across 130+ brands demonstrates that growth comes from reaching more potential buyers, not squeezing more from existing ones. Reaching more buyers costs money. Your prices determine whether you have it. 3. Higher prices create a feedback loop of quality signals. Professional branding, better photography, higher-quality content, faster follow-up. All of these cost money. All of them increase perceived authority. All of them justify the price, which funds more of the same.The Red Bull Proof
No case study illustrates this better than Red Bull.
Red Bull costs two to three times more per ounce than Monster or Rockstar. It fails blind taste tests. It comes in a smaller can. By every rational measure, it should lose.
Instead, Red Bull holds 43% of the global energy drink market and sells 12.7 billion cans a year. Revenue exceeded €12 billion in 2025.
The mechanism is exactly what we're describing. Red Bull's premium price creates premium margins. Those margins fund one of the most aggressive marketing operations in consumer goods, spending 25 to 30% of revenue on marketing. That marketing creates cultural dominance, which justifies the premium price, which funds more marketing. The virtuous cycle never stops.
Sutherland points out that Red Bull shares the features of an effective placebo: expensive, strange-tasting, and available in restricted doses. The price is the product. It signals that this drink does something, because why else would it cost that much?
Your plumbing business is not Red Bull. But the mechanism is identical. Price creates margin. Margin creates budget. Budget creates presence. Presence creates trust. Trust justifies the price. It is the same loop at every scale.
The Hormozi Test: Price Is Not in the Value Equation
Alex Hormozi's value equation from $100M Offers gives us a useful lens for this:
Value = (Dream Outcome x Perceived Likelihood of Achievement) / (Time Delay x Effort & Sacrifice)Notice what's missing. Price is not in the equation.
You don't increase value by dropping price. You increase it by making the dream outcome clearer, making success feel more certain, reducing the time to results, and reducing the effort required from the buyer. As Dan Kennedy puts it: "There is no strategic benefit to being the second cheapest in the marketplace, but there is for being the most expensive."
When a plumber charges $180 for a callout while every competitor charges $120, and they get the job anyway, it's because they answered the phone in two rings, arrived the same day, texted a photo of the technician beforehand, and have 200 Google reviews at 4.9 stars. The extra $60 funds everything that made the buyer feel confident.
Hormozi frames it directly: underpricing creates under-delivery. Low price sets low expectations, which reduces buyer commitment, which produces mediocre results, which generates weak testimonials, which makes future marketing harder. It's the death spiral Binet described, but viewed from the buyer's side.
The ESOV Rule and Why It Matters for SMEs
Binet and Field's research established the Excess Share of Voice (ESOV) principle: for every 10 percentage points your share of voice exceeds your market share, you gain roughly 0.5 to 0.7% market share per year.
The implication is brutal for underpriced businesses. If your marketing budget can only fund a 2% share of voice in your category, and your market share is 5%, you are running a negative ESOV of 3 points. You are shrinking by default. Not because your ads are bad. Not because your agency is underperforming. Because your budget cannot sustain the presence required to grow.
A trades business running on 8% net margins literally cannot afford the marketing spend that research says is necessary for growth. They are structurally locked out of the growth loop by their own pricing.
| Scenario | Share of voice | Market share | ESOV | Trajectory |
|---|---|---|---|---|
| Underpriced (3% marketing spend) | 2% | 5% | -3% | Shrinking |
| Properly priced (7% marketing spend) | 6% | 5% | +1% | Growing |
| Premium priced (10% marketing spend) | 9% | 5% | +4% | Growing fast |
The difference between shrinking and growing fast is not strategy. It's arithmetic. And the arithmetic starts with the price on your quote.
"But My Customers Won't Pay More"
This is the objection every business owner has, and it's almost always wrong.
The data is clear: only 16.3% of customers prioritise low price. Over 50% prioritise quality. Price elasticity research shows that most service businesses operate in inelastic demand territory, meaning a 10% price increase does not produce a 10% drop in demand. Healthcare services, for example, show elasticity of -0.2 to -0.4. A 10% price rise might reduce demand by 2 to 4%. The net effect on profit is overwhelmingly positive.
Value-based pricing firms report 18% higher average profit margins than cost-plus firms. SMEs using segmented pricing saw a 27% increase in sales compared to uniform pricing models.
The customers you lose when you raise prices are, almost without exception, the customers that cost you the most to serve, complain the most, and refer the least. Losing them is not a risk. It's a benefit.
What This Means for Your Business
If you're spending $2,000 to $5,000 a month on Google Ads and the results feel thin, the problem might not be your campaigns. It might be that your prices have structurally locked you into a budget that cannot win.
Three things to do this month: 1. Calculate your marketing budget as a percentage of revenue. If it's below 5%, you are likely underspending. If your margins don't allow 5 to 7%, that's a pricing problem, not a marketing one. 2. Raise one price by 10% and measure. Pick your most popular service. Increase the price by 10%. Track close rate over 60 days. The research says demand will drop by 2 to 4% at most. Your profit per job will increase by far more than the volume you lose. 3. Invest the margin difference into marketing. Not into a new campaign. Into more budget for the campaigns that are already working. Binet's data says this is the 89% lever. Use it.The businesses that grow are not the ones with the best ads. They're the ones with the margins to keep showing up. Your price determines whether you can afford to be remembered. And in marketing, being remembered is everything.
Further Reading
- Budget is 9x more important than ROI: Les Binet at Cannes 2026 - The data that rewrites the marketing budget conversation
- McKinsey: Pricing as a strategic growth engine - Why a 1% price increase lifts profit by 11%
- Alex Hormozi: The Value Equation explained - Why price and value are not the same thing
- Dan Kennedy: No B.S. Price Strategy - The case against competing on price
Dream Outcome is an Australian digital marketing agency helping SMEs grow through Google Ads, Facebook Ads, and Email Marketing.