Marketing is key. Right? But how much should your small business spend on marketing?
You know that marketing creates business, brings customers and helps you establish your brand. It helps you keep up with your competition, prevents you from getting lost in obscurity, helps customers remember you, gets you noticed in positive ways, makes sure potential customers know what you are offering. But it costs you money. What is the right amount of your income to devote to marketing?
What is marketing?
Marketing expenses for small businesses refer to a broad range of costs. These can include everything from your website to printing flyers and posters to billboards to social media to web advertising to public relations to event marketing to … and the list goes on. But all of these fall under promotions. They are all intended, in some way, to promote the business and its products/services. This increases revenue and sales.
Why is marketing important?
Before you decide how much to spend on marketing, you need to shift your mindset about what marketing is. Let’s stop using the word “spend” and start using the word “invest.” Marketing should not be thought of as an expense. It must be considered an investment. And you need to get a return on this investment.
The reason businesses invest in marketing is because it works. Not all marketing works for all businesses, but there is a type of marketing that works for your business. When you pay someone to do marketing for your business, you are paying them to find the type of marketing that works for you. And you are paying them to implement that marketing plan.
How do you decide the right amount to spend on marketing?
Recommendations for what should be invested in marketing range from anywhere between 1-2% up to about 12% of gross revenue. Most recommendations for small businesses, though, say you should spend about 7-8% of your gross revenue.
The average amounts vary considerably from industry to industry. For example, the U.S. Small Business Administration reports that retailers spend about 4%, restaurants 2%, B2B product companies 6%, B2B services companies 7%, B2C product companies 10%, and B2C services companies 12%. You need to decide what is right for you based on your industry, your goals, your costs and the results.
Research your industry
Marketing numbers vary widely depending on your type of business, so it is important to focus on your industry. Determine what is normal for your industry and start from this point. Research online, contact your industry trade association and network with other businesses in your industry to get accurate numbers.
Set definite goals
Determine what you are trying to accomplish with your investment. If you don’t know what you are trying to achieve, you won’t know whether or not your marketing has succeeded. Do you want to increase the number of customers? The number of sales? Or do you want to increase the perceived value of your product? The perceived image of your business? Increase traffic to your website? Reach a new target audience? There is an innumerable amount of potential goals, so determining which one you want to accomplish is essential.
Determine potential costs
Marketing can be broken into many categories, and it’s important to organize your costs by these categories. Some of the most common marketing categories are website, social media, online advertising, traditional media (radio, print, TV, billboard), e-newsletters, video and training.
Website includes the design and creation of your website, monthly hosting costs, updating of content, and any management fees. Social media includes any copywriting, photography or videography costs for your posts as well as paid advertising on the platforms. Online advertising includes advertising through search engines such as Google Ads or through specific sites within your target market. E-newsletters include the cost of creation of content included in the newsletters as well as the cost of the online tools used to distribute the newsletters. Video includes the costs of hiring someone to shoot and edit video or the costs of purchasing and using the equipment yourself. Training includes any time committed to teaching internal staff how to implement your marketing campaigns.
Review the results and adjust
You (or your marketing team) will need to collect data on your marketing plan and review this information. It is recommended you review this at least quarterly. You will see if your plan is achieving your goals. You are spending the right amount if it is achieving your goals. If it is not, you need to adjust. You may not be spending the right amount, or your spending may just be in the wrong area. This will be what needs to be determined at this point.
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Contact Exploring Creative, LLC, for assistance with your marketing needs.