A business can’t afford to not spend on marketing. That’s because marketing is all about finding new clients and showing them why you’re the better choice out of all your competitors.
Like other tasks or business processes, marketing requires resources, or a percentage of your business’ operating budget. While business owners know they ought to spend on marketing, how much of their budget they should allocate to marketing isn’t always clear.
If your business makes less than $5 million, the US Small Business Administration advises you to set aside 7 to 8% of your revenue for marketing. However, there is no fixed or ideal percentage that applies to all businesses. How much you spend on marketing depends not just on revenue, but on what stage of growth your business is in, and what industry you belong to.
A new business, for instance, is expected to spend more on marketing than one that’s already been established. Businesses in retail, consumer electronics and financial services, for example, also tend to have a bigger marketing budget than those in other industries.
- Define your marketing objectives. Before you can determine exactly how much your business needs to spend on marketing, you must first be clear on what you want your marketing activities to achieve. These objectives must be specific and have a timeframe for achieving them, as well as quantifiable outcomes.
- Identify the marketing activities needed to reach these objectives. If, for example, you want your marketing objectives to generate awareness for your business, display advertising may be one marketing activity you can carry out. If your objective is to generate X leads within X months, you could consider inbound marketing tactics.
- List what you need to perform these marketing activities. If you choose to run a display campaign, you’re going to need a copywriter, a graphic designer, and a media planner to take care of running the ads and managing ad spend. You’ll need similar resources for inbound and other digital marketing activities.
- Compute how much these activities will cost. Rates for each resource (whether internal or outsourced) and marketing channel will vary. Even if you choose to do some or all of these marketing activities yourself, a considerable amount of time will still need to be spent on top of the cost of tools and utilities.
- Have metrics in place for tracking marketing performance. Your marketing budget will need to be periodically adjusted to make sure you’re getting the most out of every dollar, and these adjustments can only be made on the heels of careful monitoring. You should be able to re-allocate resources as needed to marketing activities that are performing better than others.
Prioritizing your marketing activities after adding up these costs are big decisions you’ll have to make. If you could use some assistance in planning your marketing budget against the bigger picture, we’re just a discovery call away.