You have to spend money to make money
In every industry and field of business, the marketing department is usually first on the chopping block when it comes to budget cuts. There seems to be an unspoken rule that says, when sales are good it’s kudos to the sale team, but if sales are down, the blame is laid firmly at the door of the marketing team. This infers marketing makes no contribution to the success of a business, yet on the other hand, bad marketing must be responsible for a lack of sales.
Marketing is the lifeblood of your business
So, which is it: is marketing irrelevant or crucial to the success of a business? In reality, marketing is the lifeblood of any business and should be first in line when it comes to allocating budgets. Savvy business owners understand that the key to an effective marketing strategy that will deliver upon the company’s goals, is a realistic investment in marketing.
It’s important to understand that it takes money to make money. However, allocating a budget for marketing can be daunting, particularly if you are a start-up or small business without the luxury of a big bank account behind you.
5% to 20% of revenue
As a rule of thumb, your marketing budget should be between 5% and 20% of your revenue in order to make a dent. In order for your campaigns to grow, you should expect to spend between 11% and 20%, with 5% to 10% sufficient to maintain the status quo.
How to calculate your budget
There is no one size fits all (as outlined in our article It depends…), all companies are different. However, there is a standard set of parameters that you should look at to help you calculate the right budget for your business:
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Goals
What is the purpose of your marketing; increase brand awareness to get yourself known or maybe to increase market share by attracting new clients? If your goals are to aggressively increase market share, the bigger the budget (percentage of revenue).
This decision should be data-driven, based on the cost per conversion, number of conversions and lifetime conversion values. In simple terms, if you experience that the conversion costs are too high, try another marketing channel with a better return on investment.
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Industry / location
If you are working in a particularly competitive field of industry, such as real estate on the Costa del Sol, the cost of generating online leads is going to more expensive. This means that you will need to allocate a higher percentage of revenue for your budget or you need to think outside of the box.
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Competition
It’s important to know who your competition is, so you know where you need to compete to get your brand seen. If you are up against large, established businesses with a huge budget, not all is lost you, you just need to be smarter in identifying your target market and crafting your messaging. Smaller business can also be more flexible, which allowing you to adapt and pivot more quickly, if a particular pain point is identified.
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Brand lifecycle – new businesses
Although a start up business usually has less cash to throw around, it is at this stage of the brand lifecycle that a larger marketing budget is crucial. According to Hubspot’s “Start up marketing Budget’ report, around 11% of projected revenue should be allocated towards marketing.
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Product lifecycle
Similar to the brand lifecycle, products and services also have their own cycle, which needs different levels of investment throughout. Upon launching a new product, you need to raise awareness and generate interest, which means spending money. As demand for a product grows, the marketing budget should remain robust in order to achieve the desired market share. As a product reaches ‘maturity’, spending can plateau somewhat, ensuring enough budget to keep things on the right track and to stay ahead of the competition.
Overall, it doesn’t matter the size of your business or your budget, the focus of your marketing campaigns should be on generating quality, not quantity of leads. Redline’s digital marketing experts can create an online marketing strategy outlining the most relevant platforms for your product and target market.
Size doesn’t matter but it certainly helps!
Get in touch if you would like marketing assistance for a new or an established business. Visit our website redlinecompany.com, email on [email protected], Whats App: (+34) 609 646 088 or call us on (+34) 952 816 678.
