Establishing a marketing budget is an intimidating mission for business owners and there are many different ways to approach the task. Your budget will vary based on your competition, profit margins, your industry and a large host of other factors but let's take a look at some popular considerations when determining how much you should spend on marketing your business for financial success.
Marketing by percentages.
In terms of percentage - It's generally recommended that you spend about 7 to 8% of your gross revenue on marketing. This of course depends on your revenue, keeping in mind that if you're just starting out and don't have much on record in revenue you might need to spend a little more to get the ball rolling. Research conducted by the Chief Marketing Officers (CMO) shows that 58% of businesses spend less than 4% of their gross revenue on marketing, while 16% spent 5-6%, 23% spent more than 6%, and less than 2% spent more than 20% on a marketing plan. In reality this means that if you set the level of your marketing costs to a range between 0 and 6% of your gross revenue, you are in the majority.
Variables in spending & watching your competition.
Regardless of what others are spending, there is obviously a limit to what you can afford. Naturally, affordability should guide your marketing expenditures. After you map out what you can invest, take the time to research internal/external factors that may cause your spending to fluctuate. For example, if you're introducing something new, there will be a natural spike in your marketing costs as you push the latest product or service to the "top" of your customer's mind. Similarly, if your competition is turning up the heat, you may have no choice but to increase what you're spending on marketing. If you don't have the money to match your competition's marketing splurge, then invest some hours in research. Knowledge is power. If your pockets aren't deep and you feel pressure to match your rivals, spend time instead of dollars developing a plan that is more effective than costly.
Task-oriented marketing drives revenue.
Marketing always generates revenue – not the opposite. However the most successful marketing is task or project oriented executed with a solid plan. We can't reiterate enough that lucrative marketing is a marathon that you win over time. It's not a sprint to the finish line. Patience, analysis and flexibility are required. As you measure what's working and what's not, the fine tuning you do a little at a time is what will help bring you the return you've been looking for.
Marketing is not an exact expense.
Don't get emotional, and put all your hopes into one large, costly advertising thrust. Many people think that there's a set formula: "If I spend X amount of dollars on my online campaign, I will get Y amount of business." It's rarely this tidy. The number of dollars you spend do not necessarily equal an exact number of dollars you will get for your return.
Look at the big picture.
Spending more money willy nilly, trying to reach everyone, and trying to be everywhere at once does not work unless your marketing budget is an unlimited bank account filled with free money. Marketing requires constant upkeep and analysis. Success and failure are equally important, because they are both great avenues to learn how to deliver the right message, to the right people, at the right time.
If you want your business to grow and stay competitive in your marketplace, the most crucial investment you can make lies in your marketing. However, you don't have to drain the coffers.
"Smarter" marketing, with a focus on precision and goals, is more important than having a huge budget. Plan effectively and you'll adventure down the path to success, one curve at a time.