Think Marketing is Expensive? Four Critical Things to Consider

You’ve had this thought before. It’s ok. We know. Marketing is perceived as being a costly endeavor, and therefor is often one of the last things a business owner wishes to spend valuable dollars on. But here are some key things to consider before you jump to the conclusion that marketing is a big spend.

1 | How much should you really be spending on Marketing?

For established businesses, The U.S. Small Business Administration recommends spending 7-8% of your gross revenue for businesses under $5 million, and closer to 10% for those over $5 million.  For new businesses you should be spending somewhere between 12-20% of your revenue or expected revenue.

You are probably thinking, wow, that is more than I thought. Which is why most marketers will recommend somewhere closer to 5% of your gross revenue.

2 | What is the 5% for?

Generally speaking, the 5% is for the ongoing marketing implementation of a solid foundational strategy. These are the day-to-day tactics that engage your audience, the advertisements you place with specific media and the tactics like email newsletters, video, content and so forth.  You should expect also to use more than 5% on big projects, such as website updates.

However, spending money on these day to day items will certainly be a waste of funds if you do not have a solid foundation.

3 | What is the Foundation?

In order for your day to day activities to perform well, you will need to invest in a solid marketing foundation, which, since it generally includes the necessary larger projects, will usually cost closer to the 10%.

The foundation includes items like Branding, Strategy, Website and Social Media. Working on these items to create a solid strategy that highlights your best target audience, the messaging and branding for those audiences and putting together a roadmap of strategy pieces paired with the big projects like a website will give you a healthy starting point. Once these things are completed, your day to day activities will have a much higher conversion rate.

4 | Consider the cost of client acquisition.

Still sounds expensive? Consider what a single new client means to your bottom line. For example: currently you have not built your foundation and you are relying on a sales person to convert customers. You probably see the direct correlation between what you pay that sales person to what the conversion of each customer is. Let’s say you currently spend $2,000 per new customer with your sales rep. and he or she can convert 1 new customer per month. Provided that each new customer is worth more than the $2,000 you spent, you are happy.

But consider this, you built your foundation and were able to add a highly converting website and social media channels in addition to your sales rep. Using the 5% rule, let’s say you spend $1,000 per month on digital media tactics, and can convert 2 additional customers per month. You’ve increased your customers by three times, while only spending a fraction of the cost, and in a shorter time period.

That’s where marketing becomes a savings vs. a spend.

The key is finding a marketing partner who can work with you on the foundational items, but also on a long-term implementation and execution process. This is where you will save the most.