Marketing experts and agencies often recommend that small businesses spend between 7 and 8 percent of their gross revenues on marketing. And, according to a study, small businesses tend to follow this rule, spending between 3 and 5 percent. When determining your marketing budget, there are several key factors to consider. Marketing encompasses everything from brand and website development to communications and sales. It's a large header and every component must be well thought out to ensure that your entire marketing system works at full speed.
I call it marketing and communication insurance. If you're going to spend money on brands and advertising, make sure that potential customers are managed properly. The first step in achieving this is to simplify the methods by which potential customers can connect with you. Having too many methods (such as phone, email, chat, text messaging, and messaging) can be overwhelming. I prefer the old-fashioned telephone.
While I also like the chat to communicate on the website, I strive to call the potential customer as soon as possible. Personal correspondence with potential customers is crucial in many industries. The costs of proper communication can vary between industries. Spend what it takes to ensure you don't lose potential customers due to a lack of response. Not properly managing your communication systems can be fatal for a company, as money is wasted on ads that don't convert into sales.
Another aspect of communication and marketing insurance is customer service. The last thing you want is for a new customer to request a refund because of poor service. Like communications, your sales spend will vary from industry to industry. The objective here is to develop professional presentations or sales methods that clearly and in detail explain the benefits of your offers in a way that encourages the potential customer to make a purchase. Graphic design slideshows can work well and can help your team focus during the presentation.
Videos and other media are also smart investments to improve sales results. If you trust a sales team, they must be well-dressed, polite, knowledgeable, and able to clearly communicate your products or services. Make sure they have the tools they need to succeed. Small Business Trends reports that the average company spends 1.08% of its revenues on advertising, with variations from one sector to another.
For example, retailers spend more (around 4%), while restaurants spend 1.93%. B2C companies spent slightly more on average: product companies spent 9.6% and B2C service companies 11.8%. This is because B2C companies often need to invest in more marketing channels to reach various customer segments. Now, let's look at the factors affecting your marketing strategy and the critical components of a marketing budget.
Even though the average marketing budget for small businesses can reach nearly 50% of the total budget, you don't have to let that dictate your company's budget. The size of your target market and the level of competition within that market can affect your marketing budget. On the other hand, if you're in a smaller market with less competition, you can spend less on marketing efforts. Many small business marketing budget statistics, such as those from The CMO Survey, provide a very broad view of how companies of different sizes and categories spend their hard-earned money on marketing.
A full-service marketing agency is an outside agency that handles all aspects of marketing a startup. As you better manage your marketing budget, the best investments you'll make will include analysis tools and marketing automation solutions that help you analyze your overall marketing performance and streamline repetitive tasks. For example, email marketing apps, social media apps, and online advertising offer analytics tools that you can use to see which of your marketing messages are performing the best. Instead of setting your marketing budget based on general benchmarks, you can start with a modest marketing budget that already generates a return on investment and leaves room for experimenting with new channels. If you take advantage of all the tools available, monitor your results and learn to see marketing as an investment, not as an expense, you will achieve better results with your marketing budget.
If there are significant barriers to entry in your industry or market, you may need to allocate more funds to marketing initiatives to overcome those barriers and gain market share. During this stage, marketing budgets increase significantly, and companies dedicate between 25 and 50% of their budget to initiatives of marketing.
