Do you get to the ‘marketing’ line item and really give thought to the amount you allocate? The old adage is true, ‘You have to spend money to make money.’ But how much and where should it be spent?
Many businesses have failed because they did not properly budget for and plan marketing activities. Companies can grow to a certain point via word of mouth, but then hit a threshold and stand the risk of stalling.
Old rules of thumb have it that the amount you spend on marketing each year should range anywhere from 1% to 10% of sales, or even more depending on the industry. Factors to include when deciding on your budget include variables such as:
- How established is your business? (If not everybody in your catchment area has heard of you, you should probably be spending more)
- What type of industry are you in? (Retail businesses in a competitive environment usually spend more that business to business type companies)
- Does your business operate on high or low profit margins?
- Does your product or service require high or low involvement when a purchasing decision is being made?
- How active is your competitors?
- Will you be launching a new product or service in the coming months?
- Do you just want to maintain your current position or grow market share?
In uncertain times it’s easy to – and completely acceptable – cut back on spend and wait for things to stabilise. The reverse is also true that while competitors are hurting you could make a move and ramp up spend. Keep in mind that there are so many cheap, but highly effective web options available today that you do not have to ‘spend yourself into a hole’.
Once you have an amount you are comfortable with in mind, putting a marketing plan in place is of critical importance. A plan enables you to track the performance of your spend and helps you to stay on track during the course of the year and make adjustments where needed.
The best starting point when putting together your annual marketing plan is to decide who it is that you want to target. Who are your current customers? Who are potential new customers? Spend some time thinking how best to reach them: What do they read? Where do they spend time? What would interest them?
What is your goal for the upcoming year, attracting new customers, getting current customers to increase sales or maybe re-positioning your business in the minds of customers? It goes without saying that your marketing and business strategy should align perfectly.
When starting to allocate money towards different channels keep in mind what has worked well in the past and what are potential avenues to reaching new customers. The size of your budget will also influence your plan. Bigger budgets will allow for mass reach mediums such as radio and certain magazines to be included in your plan. Smaller budgets will probably rely more on local press, leaflets aimed at a smaller local market.
I believe stronger in the value of good content than I do in the value of huge marketing budgets. A well planned, directed, interesting and perfectly executed promotion could be way more valuable than thousands being spent on, for example radio advertisements.
Make sure to allocate money towards keeping your website up to date and including social media in your plan. These are cost effective mediums for smaller budgets. Remember when a potential customer visits your website, they’ve already found you! You must however ‘make the sale’ and ensure that the image of your business and information you convey makes them take the next step.
Remember to include related expenses in your budget such as potential research work, attending trade shows, functions, brochures and training.
Your marketing plan defines how you connect with your customers. If you are doing it well you should be able to measure the success.
Some marketing initiatives are difficult to measure immediately, such as brand awareness campaigns, sales collateral, sponsorships and customer events. The sooner you get in a habit of measuring traditional product and price advertising campaigns the easier it gets.
There are various different ways to measure your return on investment – that we will discuss in future columns – the easiest way however is just measuring sales quantities during promotional periods to previous months.
Another quick way of evaluating the different mediums you are using is to be vigilant about tracking how customers find you or heard about a promotion; salesmen can ask customers and give input in what is working and what not. You could even include a question on your website enquiry form.
It is also important that if something you experimented with is not working as well as you thought it might; tweak it, until you find the recipe that works best for your business. Small businesses have the great advantage over bigger chains in that they are able to adjust and change on the fly.
I live by the saying, ‘failing to plan is planning to fail.’ I dare you – think outside of the box, budget and plan to make 2017 a year to remember!
AUTHOR: Adéle Maritz