Most business owners already know that it takes money to make money. But when starting a new business, it may be challenging to figure out how much money to invest in marketing. It can also be difficult to determine where to allocate your marketing budget. A company must market itself to raise brand awareness among potential and future customers. However, spending money without rhyme or reason can run your business into the ground.
Having a plan on how much you're spending, how you're going to allocate the money, and different scenarios planned out will benefit your business in the long and short term.
7-8% of Your Revenue, or More?
The Small Business Administration (SBA) recommends spending approximately 7-8% of your revenue on marketing if your total annual income is less than 5 million. However, this rule of thumb also depends on the industry and size of the business. For example, newer companies should plan to allocate 12-20% of gross revenue to marketing, because getting your business' name out should be a key focus with companies that are just starting. On the other hand, more established companies should typically allocate between 6-12% of their gross revenue.
What Marketing Strategies Will Work Best for You?
If you're a new business, it's a good idea to invest in both long term and short term strategies.
Short Term Strategies
Short term strategies are great for small businesses looking to get customers in the door right away. Finding avenues to market your business while getting a return on your investment is extremely important to a new business looking for customers.
Since small business owners typically don't have the same marketing budgets as large organizations, it's a good idea to create marketing campaigns designed to generate direct response, either a sale or a lead at a profitable rate. This way, you can accurately monitor your ROI. In the early stages, testing is critical, and if you don't have an idea of conceptualizing your results, you won't be able to learn from your mistakes.
For example, if you spend your entire marketing budget on a newspaper ad and two billboards, how do you know which strategy was more effective? Which advertisement brought more customers? How much did you spend per customer? Now, if you buy a single billboard and see an increase in 20 customers from the month before, you can estimate your return on investment.
Long Term Strategy
Once a small business has gotten its feet wet, it's vital to also focus on long term marketing efforts. A company that shows up organically in search results has low customer churn, and has name recognition won't need to spend nearly as much on marketing as a company that doesn't.
Blogging, building backlinks to your website, developing email lists, newsletters, and building a community through social media are all great options.
The downside of focusing on a long term marketing strategy is that it is difficult to calculate your return on investment. A blog written today can help you reach customers in 6 years, and your email list could increase return customers by 200%. But you won't be able to predict this accurately. However, you can trust that if you focus on quality and doing things the right way, your efforts will pay off.
If you're unsure where to start, social media can be a great place. It doesn't cost you anything to start, and paid advertising on the platforms is relatively cheap. You can start building a community, while also finding your first customers at the same time.
Which Marketing Channels Should You Use?
There is a wide variety of marketing avenues that you could spend your time and money on, including branding, website, email, social media, SEO, print ads, events, and countless more.
Keep in mind, though, that every business is different. You'll need to make sure you choose specific and efficient marketing techniques that will help your business. Focus on what works best for your brand, and make sure your efforts are trackable so you can determine which advertising dollars are leading to actual sales.
For example, your target audience might be on social media, but that doesn't mean your company needs to spend every marketing resource on social media. Email marketing or paid search results may be just as useful to get in front of your audience digitally. Your goal is not only to stretch your dollar but to get data that you can use to make data-driven decisions in the future.
It's also helpful to remember that you need multiple touchpoints to connect with a potential customer. On average, customers use six touchpoints when purchasing an item. These touchpoints include both online and traditional, so it's a good idea to invest in a variety of different marketing strategies to make sure you're staying in the forefront of your potential customers' minds. To get into the minds of these potential customers, make sure that you've gone through and mapped out your customer's journey to clearly define where your ideal touchpoints are, both online and offline.
Do What Works For Your Business
A successful marketing strategy is one that works for your company's unique goals. There are countless Youtube Gurus and marketing agencies who claim they have "the secret sauce," but great marketing requires data and research. Each business is unique, and while you can use your competition to get an idea of what is working, robust data and evidence is always your best bet.
Set your marketing budget, work with the plan you've established, but also remember that you may need to pivot your strategy. Don't put all your eggs in one basket and be willing to adjust and make changes along the way. If your results are pointing you in a new direction, don’t go down with the ship.
Marketing is a lot of trial and error, but once you find a formula that works, you can scale your business to something you have always dreamed of.