Some simple research on the internet will usually produce a formula to help you work out a percentage of your profit that can be spent on marketing. Despite perhaps hearing this method down the pub, this is NOT how I would recommend you set a marketing budget… You’ve heard the phrase, ‘you have to spend money to make money’, so let’s look at how best to channel your spending for the greatest return on your investment.
Marketing strategy and tactics – the what and the how
Setting a marketing budget begins with a marketing plan. Everything in business is strategy-driven, because without a sound strategy and comprehensive set of tactics you won’t be able to identify what works and what doesn’t.
The basis of a good marketing strategy is in identifying who your customers are, and what you are offering them. Then we move on to ask where they are and how we attract those customers to our offering. That’s when we can begin to build the plan and identify actions, and to use my favourite phrase, high pay-off activities to drive us toward that desired return.
How much does marketing cost?
We can’t begin to answer that question without knowing the marketing activities we need to undertake.
Your audience may be strictly mobile users on TikTok in which case you need to ensure your website is mobile adaptive, you can produce great looking video content, you have a scheduling tool and maybe some budget for advertising.
Do your customers prefer to take in information by watching, listening or reading? Maybe your new customers are visiting a shop or exhibition in person, or they are browsing the web or social media at home in the evenings… This knowledge of your customers will direct what area of marketing you can invest in.
Example: Perhaps your customers prefer a phone call rather than an email – the cost might include your own time, professional hardware setup, network charges, or an outsourced company.
Your marketing budget
Marketing is not a golden ticket to doubling your customer base, but it is a sound investment for future growth. To effectively scale you want your marketing to provide a reliable flow of new leads. In summary, these things will help guide your marketing spend;
- Your customer personas and what they want to hear from you
- How your potential customers like hearing from you
- What actions can you take to ensure you meet your potential customers?
- How much time will the action take to implement?
- Is an outsourcer a good investment to free up your own time?
- How can you automate your actions?
- How can you measure marketing success against spend?
TIP: Give your marketing plan plenty of time to produce measurable results, then look to see if you can improve those results by doing more of the same or by making small changes. Put the timeframe in your plan.
For most businesses your marketing spend can be forecast based on what tactics you need to use to pull your audience towards you and the resources needed to generate the revenues you desire (how much that costs in terms of time and actual investment). Some tactics will have a defined cost attached to them (social media, SEO, PPC) whilst others may need testing to establish the likely level of investment needed (Telesales, Direct Mail, Email marketing, Funnels). If you are testing, I suggest testing small in the first instance.
The real takeaway from this article is that you can’t market to everywhere all at once so get specific, understand your audience, do what is right for them, and if it is costing you money rather than an investment providing a return – cut it.
There’s more on focusing on activity to drive revenue in the article, ‘Stop Focusing on the Wrong Numbers’, and if you‘d like to talk about the specifics of your customers and how to set a marketing budget that’s right for you, get in touch, I can help.