How much should I budget for marketing?
The industry’s “rule of thumb” is 5-6% of your gross sales. Well, it’s a starting place. Putting those in real numbers, if your business grosses $1mm a year, 6% is, of course, $60,000. That’s pretty astronomical for most small business. We see most small businesses do an adequate job at 3%. But don’t start recalculating your 2015 budget just yet.
Here are some ideas about what might affect your marketing budget:
Audience – An organization’s audience is vital to knowing how much money to spend. Different tactics require different allocations. Print, for example, costs a lot more money than digital. But if your audience will respond more positively to print than digital marketing, you must allocate the dollars wisely. Just because it’s cheaper doesn’t mean it’s the right choice for you. Knowing your audience will save you money in the long run.
Geography – The media sells impressions, often-times using the disgusting term “eye balls.” What we want is a higher quality of eye ball. If your audience will only drive 10 minutes to patronize your store, buying metro media lends itself to a lot of wasted eye balls. However, if your local audience doesn’t need enough of your product for you to survive, you need to expand your geographic reach with a message enticing the eyes balls to drive a little further. That’s gonna require a bit bigger budget, and maybe a revision to your product and its price.
Budget Allocation – Figuring out what is actually included in your Marketing Line Item is the most convoluted one on the list. You’ve undoubtedly learned the Four Ps of marketing by now – Price, Product, Promotion and Place. Now, Barker & Christol can help you with all four of these, but we specialize in Promotion, ‘cause we’re an Ad Agency under the guise of a Marketing Firm. So, logically, if you believe in sticking to marketing 101 your marketing budget should actually include rent (place), R&D (product), research (price) and promotion, otherwise know as your operating budget. What we’re really asking is what is thou promotions budget?
Promotions includes Advertising, Public Relations, and Sales. These silos can all command great percentages of your budget and it is hard to know the magic mix. Here’s what you’ll find stored in each silo:
Sales – salary/commissions, brochures, branded premiums, trade show or community fair items, training
Advertising – digital advertising like PPC, print, tv, radio…the options are endless
Public Relations – The most fluid of all, but mostly include media relations, events, philanthropy (like the little league team all the way up to cash donations to worthy non-profits), etc.
Appropriating is a strategy in itself, based on your business and marketing goals. But you still have to know that how much you have to allocate before you allocate.
What is a good marketing budget?
PSA: A Starting Point for Budgeting
We had to go through all of that to get to this – our recommendation. The safe zone is 6% of your gross revenues allocated to marketing promotions, excluding compensation for sales staff.
Here’s a simple 1..2..3..
1. Figure out your starting point. Who do you want to reach and why. Where are they and how do you expect to get to them.
2. Look at your budget. How much are you comfortable with spending. How much are you uncomfortable with spending? Do you want your sales and philanthropy dollars to be included in that promotions budget? (we recommend not, though your support materials like brochures and trade show design can be)
3. Now think about that 6% of your gross revenue? Are you anywhere close to it? Are you in the safe zone?
Step 4 is simple. Call us. We really can help. Unless you own a “Marketing Firm”, which would raise more questions if you did call us, you’re not an expert in marketing. And that’s okay!!! We are experts, and we want to help.