To determine their marketing budget, small businesses estimate their sales revenue, cost-of-goods, overhead and salaries and then gross profit. Anything left is considered available funds for marketing support. That's not such a good idea. A more rational approach for setting your marketing budget is to estimate what your direct competitors spend in marketing support and then try to at least match that amount.
My business is done by word of mouth
Of course it is! And make no mistake, free publicity and networking can get you lots of mileage. However, if you live by the old marketing rule of seven to twelve impressions for remembering your marketing message, you have lots of educating to do about your business and what you have to offer. If you don't have a marketing plan and budget in place, guaranteed your competitor has one.
Helpful Pre-budgeting Research
Know your key industry and market factors when developing your marketing plan and budget. Your plan and budget will also be influenced by researching your competition.
Other information that can guide your spending plan is found in your internal records. What advertising expenditures have proven successful for your business? For example, you can review internal records to determine your past marketing activities and dollars spent. A full marketing communications review should include:
- Market research
- Competitor/SWOT Analysis
- Internal marketing performance records
- Marketing and Communications Audit
How much will this cost me?
According to SCORE.org the amount you should set aside for advertising and markeitng can vary from 1 percent of net sales for industrial business operations to 10 percent for companies marketing consumer packaged goods. Other factors to consider are:
- How established is your business? There is something to be said for the number of years you have been in business, but do people really know you? A great way to gauge your name recognition and reputation is by feedback from your sales team and customers. Do consumers or other businesses know about your products and services?
- What industry are you in? Again, it is highly recommended to have a sense of how much your competitor is spending.
- Be realistic about how much you can afford.
When you are coming up with an annual budget figure it is also important to include marketing training. Attend events, seminars and classes or hire a professional marketing consultant to help you with special projects.
Where and How
Once you have an amount established that you are comfortable with, plan where and how you will spend your marketing dollars.
There are of course the more traditional approaches such as:
Don't forget some of the more essential marketing approaches are also the most cost effective. Inbound marketing strategies such as your website, blog and social media cost up to 61% less than traditional outbound marketing.
Track, Track, Track
You cannot improve what you do not measure. Be sure to track how customers find you. This can be done in several ways including simple paper surveys from your brick and mortar location or a form on your website. You always want to make sure your hard earned dollars are working for you.
Remember, marketing is not an science. Don't be afraid to experiment. If you’re getting more response from your content-rich website, or more people are reading your blog and following your tweets, keep spending your time and/or money on those efforts. If more of your ideal customers are finding you from a print ad in a local magazine, or because they heard about you on the radio, terrific. Spend more there, and less on the less productive channels.
Just as the best racecar driver has the best mechanic tweaking and adjusting performance, so should you adjust your marketing efforts for the best business performance.