The key to success in any business is an effective marketing strategy.
Marketing is necessary to informing customers about your company, and persuading them to make a purchase. No matter how high the quality of your product or service is, you will not be successful in selling it unless your message reaches your target market.
Despite the importance of marketing, many businesses do not dedicate the proper attention to it.
A recent survey by the Small Business Administration showed that more than a third of companies admitted to having no marketing strategy. To be fair, developing a marketing strategy can be extremely difficult for small businesses — particularly startups.
Even though marketing is essential for success, most new businesses lack the capital necessary to fund a comprehensive marketing strategy. Given this challenge, how should a small business or startup determine its marketing budget?
Let’s look a few key factors that can help business owners make this decision.
Marketing can be simple
Some small businesses are under the impression that they don’t have enough money to devote to marketing. But marketing doesn’t always have to be expensive.
Running a successful marketing campaign isn’t about how much money you spend. Instead, it’s about how smart you are about allocating the resources you have.
At it’s core, marketing is the process by which a business promotes its products or services to a targeted customer base. So, while you could put up a billboard, or hire a skywriter, there are plenty of simple ways to do this. For instance, sending out weekly emails to contacts on your prospects lists is an inexpensive way to communicate with your target audience.
Think of your marketing budget as a percentage of your revenue
In order to continue growing your revenue, your business should dedicate a certain percentage of gross revenues to marketing. For startups, the number can be calculated in terms of projected revenue.
As a general rule of thumb, it is recommended for established companies to dedicate about 10% of their total revenue to marketing.
For new businesses, however, that number should be close to 15-20%.
At first, it may seem counter-intuitive for new businesses to spend a larger percentage of revenue on marketing. After all, their total revenue is likely to be much smaller than a larger company’s.
For new businesses, however, marketing is extremely important. This is because new businesses must develop a brand identity, brand recognition, and customer base.
Once a business has established itself, the level of marketing needed to make its name known is no longer necessary.
Understanding types of marketing
Not all marketing plans and marketing budget are created equal.
There are several goals within marketing. There are also varying approaches to achieving these goals. The strategies that your company should choose to use will depend on the specific needs of your business. It will also depend on the profile of your customers.
Some companies may choose to invest a little in many different marketing strategies. Others may choose to focus heavily on one particular approach.
Let’s take a look at some of the most common marketing strategies.
Your company’s brand is essentially its identity. Developing a consistent brand across platforms helps your customers to recognize your business, and understand its purpose.
For an example of company brand, think of a can of Coca-Cola.
Now, think of a bottle of Coca-Cola.
All of these items have key design features in common. Coca-Cola always features the colors red and white, and has the same iconic cursive script.
Your marketing campaign should dedicate resources to developing a brand that your customers will recognize.
In order to resonate with customers, branding should look the same in print materials, on the company website, on social media, etc.
Because your brand will become so closely associated with your company, it’s important for it to look good. With the help of a design expert, your company can create a brand that is simple and visually appealing.
There’s a phrase that gets thrown around a lot in marketing: “Content is king.” In modern marketing, content has become an increasingly important way of engaging customers.
The internet has made people into savvy customers who can easily research products. Because of this, customers have become sensitive to feeling like they’re being advertised to. Instead, customers want to feel informed. Additionally, modern customers value the ability to develop a relationship with businesses they support.
Content is essential to fulfilling these customer needs and expectations.
With effective content, you can educate your customers about your business. The more engaging your content is, the more likely your customers are to interact with your brand.
For this reason, content marketing goes hand-in-hand with social media marketing. When your company shares great content on social media, your customers will interact with it. This exposes the content to their network of friends and contacts, which helps to expand your company’s reach.
Evaluating the effectiveness of your marketing campaign
Before your company begins spending money on marketing, it is important to understand how to evaluate your marketing campaigns.
A proper evaluation will help your company determine whether the money dedicated to marketing is being well spent.
To calculate the effectiveness of a particular marketing strategy, simply use the return on investment (ROI) equation.
The equation for return on investment is fairly straightforward. Simply subtract the cost of the investment from the gain of the investment, and divide by the cost of the investment.
The solution to the equation is the ROI, reflected as a percentage.
That said, while ROI is easy to calculate, the results are not necessarily easy to interpret. For instance, some marketing strategies, like social media and content marketing, may not have significant short-term results. Instead, they lay the groundwork for more significant long-term results.
If you measure your ROI for such strategies too early, you could be misled into assuming that these strategies are not profitable.
Remember, your marketing plan and your marketing budget should be thought of like a marathon, rather than a sprint.
If you’re ready to start building a marketing budget for your business, contact us. We’ll work with you to develop a plan that is perfect your company’s needs ad budget.