What percentage of revenue should a business allocate for its marketing spend?
If you’re looking for a one-size-fits-all answer to that question, you may not likely get it.
Marketing spend can depend on the industry in question or the goals of the business. It can also depend on the phase that the business is or its short term and long term goals.
So you see that there is no general solution when it comes to making a decision on marketing spend.
This guide offers you 7 proven ways that will help you decide on how much to allocate.
One of the tips might just be what you need, or you may need to combine more than one.
However, the goal is to enable you reach a decision that will get you the best ROI.
1 – Aligning with Your Company Goals
Businesses have short, mid and long term goals of what they intend to achieve within these periods.
These plans will include goals for all the units or departments in that business. Each unit is expected to also contribute in unique ways to the overall business goal.
Creating a marketing budget this way will be determined by the goals that the business plans to achieve.
Will the business be focused on driving more awareness of its products, services or brand?
Is the business focused on the capture of new leads or nurturing the current leads?
What are the resources that the business requires for it to achieve these marketing goals?
Answers to these and other marketing related goals will give you a good picture of what to set aside.
2 – Outsource vs In-house?
Depending on the size of a business and staff skillset, marketing skills can be sourced in any of two ways.
The business may decide to outsource certain or all aspects of marketing to an agency to manage. This option may turn out to be cheaper or more expensive depending on the contract scope.
If the business has staff members that have the skillset to manage and successfully drive the campaign, then in-house is the best option.
Even if there are no trained persons for the job, staff members with similar hobbies can fill in.
For instance, a person who is very active on social media can take up the role of social media manager.
It’s a great way to get all members of the business involved in everything that has to do with its marketing.
3 – Work With a Fixed Percentage
This option is the simplest and most direct answer to the question of what to spend for marketing.
Firstly, this answer is based on the industry that the business is involved in. For instance, marketing spend for a bank will be different from an online business.
By nature, some industries require much more for marketing than others.
Also, if you’re working with a percentage will it be based on sales or revenue? Again, it will depend on the size of the business, source of financing and some other factors.
Finally, what figure should the business allocate for marketing, is it 5%, 10% or 20%?
4 – Income Sources
When a business is in its infancy, it has to source for marketing funds from outside its operations. But a fully mature or profit making business will be able to generate funds for its marketing.
The different avenues that generate a business’ income sources will determine its marketing spend.
5 – Tools of The Trade
For marketing to be effective there is the need to provide for the right tools to use for marketing.
The marketing channels, technology, persons and other tools will determine what to allocate.
For instance, if the channel that the business intends to use is traditional media, then there’s need to cover ads costs. These costs will include ads spend for radio, for TV, roadside banners, neon signs and other methods.
If marketing requires research then there is the need to engage persons or agencies for data gathering.
There is the need design and other tools that the creative unit requires to get its job done.
There has to be resources set aside for online and social media marketing. A social media manager has to be engaged, and given the right tools to work with.
Funds for Facebook ads, Twitter Ads, LinkedIn ads and Google AdWords also have to be set aside.
6 – Tools for Tracking Performance
There are lots of tools that can be used to make your marketing more effective.
A search on the internet will reveal both free and paid marketing tools that the business can make use of.
Also, the functions and features of these tools will determine what you can achieve with these tools. These will also determine how much that the tools can be acquired for.
Marketing tools will help the business to automate its marketing and scale its results. Also, performance can be tracked and real-time insights from all marketing activities obtained.
The range of marketing tools will determine how much the business should set aside for its spending.
7 – Take Advantage of Freelancers
Engaging freelancers are a great way of achieving marketing goals at reduced prices.
Instead of having to employ persons to fill up marketing roles, certain tasks can be outsourced to freelancers. This will save cost that the business would have incurred if the persons are retained as staff members.
The use of freelancers allows the business access talents at reduced price without any compromise of service quality.
The choices decided upon will affect the total marketing spend for the business.
As new businesses spring up, the competition for existing markets are becoming more intense.
Each business has to develop ways to communicate their offering to different segments of the market.
One of the major ways that a business can develop competitive edge is through its marketing efforts.
This brings us to the subject of this guide which is, “how much to spend on marketing”.
As you would have found out from this guide, there are lots of factors that affect what decisions to make on marketing spend.
If you follow the tips that are outlined in this guide, you will know the best way to reach a decision on your marketing spend. Would you like to learn how to build a passive income online? feel free to visit Wealthy Affiliate to learn it step by step.