As marketing consultants, it is common to be asked how much money should be spent on marketing and advertising. Our answer will always be that the budget always “depends on the objectives and goals”, although this is tied to the objectives that are to be achieved.
The truth is that you should not stop investing in marketing. Stopping is like think that time will stop if no clock is used. The harsh reality is that it is essential to always assign a budget to the marketing area, although a common mistake is to reduce the marketing budget sales are low.
The marketing budget allows us to generate visibility and positioning of the company and the products it offers, so do not skimp on the assignment, always keeping in mind that it must be done strategically.
According to the latest research, expert opinions and years of marketing experience, 2 to 5% of sales revenue should be spent.
On the other hand, the U.S. Small Business Administration recommends spending between 7 and 8% of his gross income on marketing and advertising budget if he makes less than $ 5 million a year in sales. This means that the net profit margin, after all, expenses, is between 10 and 12%.
We must clarify that our 5% rule applies to most years, not all, and covers most marketing expenses, but not all.
Keep in mind that there will be times when you will have to spend more to get the objectives set, although this is usually in specific campaigns. We explain to you:
Building a solid base requires a higher initial expense and then maintenance costs will be lower. This implies not only creating the strategy but the exhibition and promotion platforms.
In general, a company’s marketing base includes:
Without a solid marketing base, daily marketing activities range from “not very effective” to “a waste of money.”
Suppose you have a website with a low conversion rate because you do not take strategic actions: Only 1 in 10,000 visitors becomes a customer. If the owner of this website were investing $ 1,000 a month in online advertising, its cost to acquire each customer would be $ 2,000.
Now consider acting strategically: A business with an updated website and optimized with SEO for the conversion rate, in which 1 in 500 visitors becomes a customer. This means that we are talking about 10 new customers per month, with the same amount of traffic. This means that if the owner of this website were investing $ 1,000 a month in online advertising, its cost to acquire each client would be $ 100, is to spend 95% less to acquire each new client.
It is not always so simple, but we simplify this example to show why it is almost always beneficial to exceed the marketing budget of 5% for infrastructure investments and sales momentum campaigns.
It is commonly called spending related to marketing issues, but it is about investment since it is done frequently and generates what is known as ROI (Return on Investment).
Now that you understand the 5% rule and the importance of your marketing base, it’s time to talk about how to spend the budget.
The coherence between the identity (what is a) and image (what it transmits) of the company is fundamental and that is what constitutes the brand. Therefore, before starting any strategy, the following questions must be answered:
A fundamental step in the allocation of the marketing budget is to determine your annual marketing goals and objectives. We recommend relying on related SMART objectives. Some examples:
Once you have clear public, brand, and objectives, it is time to allocate the marketing budget. It should be borne in mind that the investment in the first months will be greater and that then it will simply be maintenance.
Additionally, it should be planned to establish campaign dates in which greater investment effort will be made.
Periodically, a report should be made in which the performance of the established KPIs will be monitored in order to verify what works, what does not work and what measures must be taken to improve the results.
As you have seen, it is a work of ants that must be done periodically in order to achieve that the objectives are achieved constantly and permanently. In IDX.MARKETING we are specialists in digital marketing strategies and we love what we do. Contact us for more information