You can have the greatest product in the world backed by top-notch service, but if no one knows about it, it doesn’t matter. That’s why marketing is so important; the key to success is having a well-considered marketing budget in place each year. Your business is doing great work so let people know about it!
How Much Revenue You Should Spend
There’s no hard and fast answer for how much you should spend on marketing but there are a number of guidelines you can use. B2B companies can typically spend less on marketing than B2C because there are a lot more consumers than there are businesses, and word of mouth is often more reliable for businesses than it is for consumers. The best practice is stated to be that B2B businesses should allocate about 2-5% of their revenue on marketing, while it is suggested that B2C companies should spend 5-10%.
You should also consider the stage of growth your company is in. When you’re releasing new products and services, your marketing budget should increase. When your goal is to maintain awareness of existing products, your budget can go down.
Your Sales Funnel
It’s impossible to establish a marketing budget without understanding where your sales are coming from. Do you have a steady flow of sales from your web portal but few from your phone or face-to-face interactions? When customers find your phone number, physical location, or website, where do they get the information? From word of mouth? From PPC advertisements? From the radio? Having a good grasp of this information will give you insights about where your budget should be spent. Look at conversion rates, leads, and amounts spent, as well as which customer demographics or personas are most likely to buy through certain avenues.
What Your Marketing Consists Of
Some marketing is obviously marketing: radio and TV ads, PPC, that sort of thing. There are a number of things you might not have considered as marketing that actually are. Trade shows (and the associated trade show banners and stands), sponsorships, your website – all of these things and more might be considered advertising. Ask yourself if something you are doing is designed exclusively to promote your business and create connections and if it is, it’s part of marketing.
Your Current Marketing Strategy
Take a look at your current marketing budget. What’s working and what isn’t? Did you get higher or lower than expected returns in a certain segment of your marketing? Were you neglecting to treat certain marketing tactics as marketing and can you now add them to the new budget? Are there variables you neglected to control for or is there information you didn’t track? The more in-depth your measurements of the previous marketing budget are, the better.
Create Actionable Goals
And the more precise you are with your goals, the better! “Increase revenue by 10%” is not a good marketing goal because it’s not narrow enough. You want to create a set timeline as well as precise goals for each type of marketing. “Increase trade show-related sales by 2% within the first quarter” is much more actionable – it creates a precise, measurable, time-bound goal that allows you to reflect on what’s working and what isn’t. For each type of marketing you’re going to employ, you should have goals like this and relay them to your team. Obviously, the goal should be achievable. Use previous marketing budgets and an evaluation of how your spending will increase or decrease those budgets in order to assess what’s manageable.
Think To The Future
We often think of marketing costs as upfront – you pay for a website and you can use it from here on out. This fails to account for ongoing costs like website maintenance, content updates, and staff training. You need to consider these costs as a part of your budget; this allows for a more accurate comparison of marketing costs from year to year.
You should also think to the future of marketing. You might reach your current clients primarily through traditional marketing but that doesn’t mean you shouldn’t invest in social media marketing, SEO, and other web marketing. As time goes on, these avenues will become more important; the best time to future-proof is now.
Consider Outside Help
A lot of businesses handle marketing in-house, but if you’re not getting results, you should consider hiring a marketing firm. While marketing firms may have higher upfront costs, you’ll generally see a bigger uptick in revenue and new clients. What’s more, if you’re handling the marketing yourself and it’s not your area of expertise, that’s time being spent away from what you do best.
In a similar vein, consider hiring a professional accountant to help with your marketing budget. They can help you determine what’s working and what isn’t and create a budget that services your business goals.
Web marketing, in particular, has a number of analytical tools which will allow you to determine how much money you’re spending on advertising, how many potential clients that advertising is bringing in, their demographic information, how many of them convert, and how much money they’re spending. Analytics software should be an important part of your marketing budget because it allows you to proceed to the next step.
With all of that information in hand, you can narrow down what’s working and what isn’t. You might find that your social media spending is giving you excellent dividends while your PPC advertising is not. Marketing budgets are important but they aren’t set in stone; they’re guiding principles you should try to adhere to. Optimize your budget by leaving room to shift money around, and do so if, after a few months, you’re noticing a clear pattern of success in one area with less success in another.
Similar to optimization, you can revise your goals and your budget as you see fit. You might, after three months, found you overshot one of your goals by a substantial margin, while struggling with others. This doesn’t mean you’ve failed; rather, it means you have vital information in order to ensure greater future success. Revise your goals, communicate the reasons for these revisions to stakeholders, and keep going. Marketing budgets can be mutable – just stay within your overall spending cap.