……..and make sure that you generate a good return from it.
In this blog, let’s get into the nitty gritty of marketing. Forget for a moment the excitement of re-branding designs, PR, and social media campaigns. Budgeting is critical in setting out a successful marketing strategy, so let’s take a look at how to set a marketing budget.
The first step in setting a marketing budget…
The first tip is to treat your marketing budget as an investment. As such, do your research and be driven by how much ROI (Return On Investment) you want/need to achieve from it.
If you want a benchmark, there are reports out there which will give you average marketing spend for specific industries, as a percentage of turnover or gross profit (GP). Between 5-15% of revenue seems to be the acknowledged rule of thumb. However, we would advise that you set your marketing budget following a thorough analysis of your business, its goals and market(s) specificity, rather than just a percentage of income. Your business is unique, so should be its marketing activities and budgeting strategy.
Measure, monitor, adjust.
When we ask what our client’s marketing budget is, the usual answer we get is either “we don’t have one”, or “oooh! I don’t know, I’ll have to check”. And that’s when we are already in a meeting to discuss their marketing strategy! Unless it is a fresh start-up, there will be historic marketing spend data somewhere. That’s a great place to start.
Another common missed opportunity is not knowing how effective previous marketing spend was. So, if you spent £5,000 on PPC (Pay-Per-Click), or £10,000 on that tradeshow stand… How much turnover did this bring back to your business? And how much profit?
Keeping track of how much you’re spending in marketing is very important. The more granular you get, the more data you can use to inform your future spend. Putting in place tracking metrics to know how effective those marketing £££s were, could be the difference between success and failure.
Take this simple example; if you know that your radio advertising has generated a 200% return on investment, and that your Facebook campaign cost more than it generated, you should consider doubling up on radio and possibly drop Facebook. Obviously, there may be other factors such as the content of the campaigns or the conversion funnel that can affect results, however, halting this spend would be a legitimate decision to make.
Why would you want to spend your money on marketing?
Please don’t invest in marketing activity just because you feel “we have to” or “that’s what you are supposed to do isn’t it?” With the growing prevalence of online channels, planning and implementing marketing campaigns on- and off-line can quickly become a minefield!
In order to preserve our client’s sanity (and our own!) is to bring the focus back to basics, asking why is it a good idea to spend hard earned cash on marketing?
We always look to find out as much as possible about:
- Starting point: Where the business is at. Results, constraints, resources, etc.
- Objective: Where you want to be. What is the Vision, do you have a blue sky scenario, do you know your break-even, and have you set realistic goals?
- Contextualise: What are the external factors involved? Competition being the obvious one.
Now you have the shape and size of the gap to fill!
A good marketing consultant should be able to take you through the process of building your marketing strategy to fill that gap. If you would rather do it yourself, Opportunity Marketing has a wealth of resources available to help you.
Analysis done. Now onto planning!
Whilst we can’t cover detailed specifics in a blog, there are various approaches you can use to get going. Depending on what stage your business is at (newly set up, established, etc.), there will be different requirements, likely to impact on the branding / promoting split.
Brand development is an investment to create and raise awareness of your brand and includes (but not limited to):
- Logo design
- Visual identity
- Sales collateral
Use the shape and size of the gap to fill (see above) to define what is a necessity, and what they should contain.
Once you have built or refined a coherent and strong brand, it is time to shout it from the rooftops. Promoting your business usually involves repeat costs such as:
- Online Campaigns
- Offline Advertising
- Point of sale
- Business development and sales
Again, these are just examples of what your marketing budget could cover; the possibilities are endless.
Existing data and analysis conducted on your business and its market(s) will help you identify and prioritise which of these areas to focus on.
Market research and specialist advice will help you understand what should be the most effective choice for your specific situation, market and business. Opportunity Marketing has several packages to help, whatever the size or situation of the business.
So, what should I do now?!
Here are the 4 steps to summarise what we have covered in this blog:
- Gather and analyse your marketing data. Put in place metrics to make this data accurate, relevant and therefore useful when deciding how much marketing budget to set, to spend and where.
- Work out the “why”. Understand where you are coming from, in order to take control of where you want to be. Product-to-market match is critical to pin down, in order to make the right marketing spend decisions.
- Analyse all relevant channels, prioritise them depending on the current position of the business, and link a ROI to each channel/campaign spend.
- Review regularly and start points 1 to 3 again! But don’t worry, it gets easier and quicker every time!
The take home message:
Remember, at the beginning we shared with you the cross industries average marketing spend (5-15% of revenue)? Too many businesses skip strategy and go straight for implementation, creating websites, visual materials and digital campaigns. This then leads to feeling the growing pressure of approaching the end of the budget they set themselves, not being sure how effective it has been. Follow the advice above and take control of your marketing budget!
We have worked with businesses spending far less than 5%. Ten times less in fact (at around 0.5%) for one such business spending about £25,000 yearly on marketing, whilst turning over around £5M. At the other end of the spectrum, We have worked with start-ups which re-invested nearly 50% of their first year revenue in marketing.
This leads us to the last words on this topic: There is no magic (budget) number. Identify what works for your business, keep tracking ROIs and improve them. The only relevance to turnover is cash flow and resources; I.e. what can I start with?
Should you need any support, give us a shout. We are here to help.