How Much Should You Spend On Marketing?
You probably expect me to say "as much as possible, and spend it with Initiative2". But that's completely false. Indeed, until we can help you identify something worth doing, I would suggest spending nothing at all.
That doesn't really answer the question. Spend 1 minute going through the following to see what you should spend.
If you had a large marketing war chest, then that would give you lots of options. What you did, how much of it, and how quickly. 10% of turnover is often quoted as how much a business should spend on marketing. Even up to 50% in the business to consumer market. But that's an ideal, and only relevant to turnovers in excess of 7 figures. With smaller businesses that might not be affordable.
So what about the "real world". The trick is to turn the question on its head. Rather than ask how much you should spend on marketing, ask how much a sale is worth to you. Then you know the maximum amount worth spending to get an additional sale.
If you sell low value products, such as penny sweets, then sales volume becomes very important. If you sell high-value, but low frequency purchase products or services, then not missing out on the opportunity becomes very important. The former is like farming. The latter is like hunting.
In normal business, once you know the marginal value of a sale, you multiply that by the expected number of sales to get the maximum amount that should be allocated to marketing.
Again, this is theoretical, and depends upon your guesses being accurate, and the marketing working. If you have been doing this successfully for a while, then you should have confidence it the numbers. But what if you're starting out, or if what you've done before has been a disaster?
We have found that the following approach works. Decide how much you can afford to "gamble". That is a strong word, but it makes the point that there are no guarantees. This might be a lump sum and / or a monthly budget.
Speak to someone about what can be done within that budget profile. At Initiative2, we will not accept a project unless we feel that the desired results are achievable.
Our approach is to use your seed-corn investment to generate business. That generates revenue, some of which you can reinvest in future marketing. It becomes a self-funding project.
To facilitate this, we offer a rolling month-to-month programme. You are not tied into a contract, and can stop whenever you wish. However, our clients tend to stick around, and even increase what they are doing.
If you don't care about your online marketing, then you wouldn't have read this far, would you? So what is your concern? Have you done no online marketing, or has it been unsuccessful but you need it to work? Get in touch and I can tell you how we could help you.
This is one of a series of articles that deal with common issues when promoting your business online. We hope that you found it useful. Go to our online marketing tips to see previous pieces of advice. If there are any topics that you would like covered, please let us know.
If you need to promote your business online, then contact us.