How Much Should You Spend on Marketing???
How much should I spend on marketing? No one likes the answer to this question because the answer is… it depends. There are three marketing metrics that when you take them individually are a good guide, but when you bring them together, they get you to a really meaningful number. The three metrics are Percentage of Growth Revenue, Market Message Saturation Budget, and the Investment you’re willing to make to Achieve your Business Objectives. So, let’s get started
Percentage of Growth Revenue. This has been around forever, and it’s a very general number that is based on surveys across lots of different markets. But, if you’re selling business to business that number is, wait for it, 5% to 10% of your Gross Revenue. Okay wait, do I need to get my resuscitation paddles and jolt you back to life? There’s always a moment where the person on the other side of the table is just keeling over. Do I have you? Good, just stay with me. 5% to 10%, caveat here, that’s just to maintain in the market, okay? That’s not to do anything special like become a market leader, that’s just to stay where you are.
The second metric, Market Message Saturation Budget. This one is fun. Let’s make belief you have all the money in the world and you want to saturate your market with the message, let’s go shopping and find every opportunity for you to get in front of your customer. So, the first place I like to look is events, facetime is golden, let’s look at every event in your marketplace and see what would cost to get a small booth or a table at that event, and bring people there. Open up your spreadsheet, put that number in. Now, look at Google paid search, think about 30 or 40 keywords people might search on, put it in that Google pricelator tool and see what the maximum inventory is, and how much you could spend maximum for month. Google is happy to tell you that information, they really are. Do the same thing for Facebook and for LinkedIn, and check out the associations that your clients are members of, you might want to buy some sponsorships, go to some of the events, maybe buy just one of those old fashion print ads in there if they have a print publication, put about half dozen full-page ads in that spreadsheet too.
Okay, now we an astronomical number, but it’s a really good reference point because it tells you the out of boundaries of what it cost to absolutely saturate your market, and guess what? In the process, you’ve become a really educated consumer of marketing opportunities, you know what things costs, and that’s really good, because when your competitor is out there and starting to show up everywhere, you’re going to have a really good idea of how much they’re spending on marketing.
Okay, let’s bring it all home to you. What do you want to get out of marketing? What’s your business objective? If you’re like a lot of businesses there’s this bubble over your head right now, and inside the bubble are the words “Fill the pipeline with leads” Well, yeah. That’s a very laudable objective, but it’s really super tactical, and I urge you to think more strategically. So, let’s take that example, “fill the pipeline with leads”. What are you really doing when you pipeline with leads and you close them and you bring new business in? Well, if you’re doing it well and you’re doing it consistently, you are gaining market share. That is strategic objective.
Okay, that’s good. Think about what the value would be to take your company from sort of the middle of the pack to the position of facing number two, threatening the top person in your market place, the top competitor in your market place. Would that make you a really tasty acquisition target? Oh, you bet it would. And would that bring greater value to your company than just simply the bottom line sales number? Absolutely. That’s shareholder value. Now, think about, what are you willing to invest to get that value? That’s your number.
Now, prove your number out. Prove it against that 5% to 10% of gross revenue, is it closer to higher end of that number? Then okay, you’re probably in the right place. What about the market message saturation budget? Then okay, you have something to work with. Now, I’m not saying that this number is going to be perfect, you may need to make some adjustments. But, with those three metrics you have solid realistic guideposts that will get you to a number that’s meaningful to you.
Okay, you don’t have to do this alone, there’s a guide linked below, so please download it, and subscribe, click the bell, and follow on Facebook and LinkedIn. Until next time, have a great business day.