You’ve already built your business around quality products and services, but all too often owners make the mistake of believing these will sell themselves. As a result, marketing efforts, whipped up after-the-fact, tend to be disjointed and poorly executed.
Every day your business is inundated with calls trying to sell you on some new tool or technique guaranteed to generate more business. How do you sift through all the noise to determine which marketing tactics are best suited for your business and clients? Creating a comprehensive, goal-oriented budget will ensure you stay on track and don’t end up throwing money at the wrong distractions that provide little or no value to your business.
Defining marketing expenses
It might come as no surprise that the first step is defining what marketing expenses are and are not. Some may be more obvious than others. Of course, paid advertising in any form, including digital display ads, search ads, as well as traditional print, television and radio ads will all count towards your marketing spend. However, you shouldn’t forget to account for the production of such ads or collateral, which will most likely require some design work and in some cases the cost of printing and materials, such as business cards, loyalty cards, and direct mail flyers.
Additionally, take into account software and technology that you’ll need to run campaigns, including email service providers, analytics tools, or anything else that you use to promote your business. Be sure that the line between marketing and sales expenses are clearly articulated and understood by both teams. Lines can easily become blurred between these two revenue generating teams.
Psst! Tracking expenses related to marketing can be complex. Check out Signpost’s infographic at the bottom of this post for a wider look at how small businesses are spending time and resources on their marketing efforts.
It’s also important to properly categorize these expenses so you can evaluate the true ROI of your efforts. The right accounting solution should make that easy and intuitive so you can monitor that performance on a monthly and annual basis. This guide can help you determine the right setup for your business’s size, budget, and goals for growth:
Structuring your business’s marketing budget
When it comes to your approach, there are many different options so take the time to determine which is best suited for your business. You can research your competitor’s marketing approach, keeping track of their different campaigns and then calculate how much it would cost to execute a similar strategy. Although this approach is common, it’s not always the best as you want to always be thinking of ways to get in front of new audiences and create campaigns that are inventive and outside the box so that potential customers will be intrigued and engaged. It’s prudent to be everywhere that your competitors are, but differentiate yourself so that you’re not always just a step behind them.
It’s even better to structure your budget according to the goals you’re hoping it will help you accomplish:
You’ll need to have a decent grasp on your customer data in order to make the necessary calculations, such as your customer acquisition cost (CAC), which is the amount of money it costs to acquire each new customer. If you’re looking to gain 100 new customers, and typically one in five makes a purchase, then you’d need to generate 500 leads in order to achieve that goal. How much does it cost your business to get 500 leads or people in store? Even if you do not go this route, it’s important to set goals to measure your campaigns against.
Finally, your budget can be dictated by a percentage of reliable revenue your business generates. This is a popular path for small businesses and startups to take, as it is also the safest. This method ensures not only that you don’t overspend, but also that you pace out your resources.
First, you must decide how much of your revenue to allocate towards marketing expenses. Start by determining reliable revenue, or the minimum amount of revenue your business consistently makes month over month, to ensure a conservative budget is created. This post can help you use your bookkeeping records to determine the funds you’ll have to work with.
Next, decide how much of this, after expenses or planned future expenses, you want to put towards marketing efforts. The SBA recommends devoting 7-8% to this cause, but far too often businesses fail to heed this suggestion, which can hinder their growth and sustainability. Additionally, you should set a goal of how much revenue you expect to bring in, based on this spend. This will help inform where and how you use resources when creating your marketing plan. Set parameters, including the timeframe that you’re planning for, whether monthly, quarterly or semi-annually.
In the beginning it might be best to stick to shorter time periods so that you can gain insights and refine your approach, but find the right balance as any campaign requires ample time to deliver outcomes. Don’t forget to take into account any changes you might be making to your offerings, whether adding a new line of products and services or eliminating underperforming lines. Be aware of the impact this could have on your business, overall, and do your best to forecast these effects so that you’ll be better equipped to manage them later on. Use data from the previous time range as a benchmark.
Getting the most business out of your marketing budget
Past experiences can help you identify opportunities that have helped with customer acquisition and retention. This can be everything from email and SMS marketing, referral strategy, loyalty programs, new customer offers, event marketing to digital and traditional advertising. Update any of these tactics, and brainstorm ways to give them a creative twist. Test different approaches, and see what gets the best traction. It’s important to understand your target audience, what motivates them and where they are, so that you can serve them the right message at the right time in order to prompt them to take action.
If you don’t already have a website, that is a great place to start. This should be the hub of your marketing efforts, directing all traffic back to this source. If you already have a site, perhaps it’s time to revisit it and make sure that it looks current, and is optimized to convert visitors into customers. Make sure it has forms to collect contact info (especially email addresses and mobile phone numbers), testimonials or social proof to illustrate how happy your customers are with your business, as well as buttons linking to third-party review sites (like Yelp) in order to both show off and encourage more five-star reviews.
Next, target the spaces where your audience is likely to be. If they frequent industry blogs or magazines, consider the advertising options these outlets offer. Or, ask about providing content for a guest post, that will expose your business to that audience. Facebook and Twitter advertising are popular options for businesses with a large number of followers or page likes. But there is no universal solution, especially when it comes to social, so go with whichever network is most popular within and presents the best opportunity for your industry. Allocate a fraction of your budget for small tests, and continue to try new things and optimize your approach.
Regardless of the types of campaigns you run, it is necessary to invest in a comprehensive communications strategy to keep customers engaged and your business top-of-mind. If you offer a free trial or a new customer offer, be sure to coordinate an email drip to keep the conversation going with these new prospects, and prompt them to convert to a standard plan or become a repeat customers.
Measuring and evaluating your results
The best way to keep improving your approach and growing your business is to be diligent about tracking and analyzing your results. It’s a good idea to incorporate this analysis into your various campaigns to monitor along the way, but you should always do a proper evaluation at the conclusion of any marketing program. It is necessary to know what works and what doesn’t, so that it can inform future spend and efforts. Fortunately, unlike traditional marketing practices, modern digital marketing tactics include tracking and reporting. As long as you continue to glean insights from past experiences, you can keep optimizing your customer acquisition and retention strategy and execution.
Although it requires a little extra effort to perform the necessary calculations and create a comprehensive plan, devoting time at the beginning of the process to budgeting will ensure your marketing stays on track. It will save you future frustration while also reducing overspending and at the end of the day, make you a more effective marketer!
Huge thank you to Signpost’s Content Marketing Manager, Jenny Hayward for providing this post! Learn more about Jenny and Signpost in the About the Author section below.