One of the hardest parts of having a local business is trying to meet what can seem like unlimited demands for your limited financial resources. Part of this dilemma is figuring out how much to spend on marketing. Let’s take a look at some things you should think about when it comes to your marketing budget.
How Much To Spend On Marketing
Although there is no hard and fast rule when it comes to budgeting for marketing, a good place to start is the U.S. Small Business Administration. It recommends that in general, small businesses with revenues less than $5 million and margins in the 10-12 percent range after expenses should use 7-8 percent of their revenues for marketing. If you’re just starting out, however, and trying to build your brand, 20% of sales might be a better target. Other sources say, based on current research and expert opinions, you should be spending 2–5% of your sales revenue on marketing. Factors, such as your industry, the size of your business, your growth stage, etc, can play a part in how much you spend on marketing. The amount you spend on marketing will also vary from year to year based on what you want and need and the projects that you’ll need to complete to accomplish your goals. For example, having an up-to-date, effective website is a cornerstone of modern marketing and in order to achieve that you’ll need to update it every 3-5 years which may require an increase in marketing spending.
How To Spend It
Your marketing budget refers to all costs for marketing, advertising, public relations, promotions, and anything else that you do day-to-day which can be considered marketing, such as online ads, social media, print ads, and sponsorships. In reports from Forrester Research and eMarketer, it was found that the average business will allocate half of their total marketing budget to online activities with search engine marketing being the largest share of online spending. They also found that mobile marketing has grown so much that they no longer track it separately and it’s presumed to be considered across all channels. The key to successful marketing is to have a strong foundation that includes things like your brand, marketing strategy, and website. To avoid wasting money on marketing activities that aren’t going to be effective, follow these steps:
- Set Your Goals - The first step is determining your marketing goals for the year. Three goals with predefined success measures for each one are a good place to start. Some common goals include:
- Increase website traffic - measured by unique visitors per month
- Increase targeted leads to the website - measured by web visits from our geographic service area
- Grow new business or develop new division - measured by total leads and sales revenue
- Check Your Foundation - Do you have a foundation that includes your brand, website, communication pieces, and reporting systems in place to meet your goals? Here are some things to consider:
- Is your brand clear and up-to-date? Does it identify you to customers and communicate a consistent brand image?
- Is your brand’s look and feel consistent across all channels?
- How does your website compare to the competition? If you’re not sure, try looking them up on the internet and doing some comparison.
- What barriers are preventing prospects from becoming customers? Put yourself in your customers’ shoes and assess the buyers’ journey.
- Do you have the tools and systems in place to measure the success of your marketing investment?
- Do you have a solid business development strategy and the marketing you’ll need to carry it out?
- Make Your Spend - Once you have set your goals and have the tools to measure your success in place, you can allocate your marketing budget. Start by addressing any weaknesses in your marketing foundation. Usually, this is done with marketing and/or business development funding separate from the 5% of sales revenue that’s earmarked for day-to-day marketing activities. Both a solid foundation and ongoing, regular marketing are necessary to grow your business. For example, you need a great website for when visitors arrive, but having a great website with no visitors isn’t going to do anything for you either. Depending on the foundational issues that need attention, you may want to address them first and limit day-to-day marketing activities until your foundation is strong. With your goals set and a strong marketing foundation, you can start deciding on your marketing activities.
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Tags: local business, marketing budget