In uncertain economic times like these, setting a marketing budget can be particularly difficult. One could make the case that, with competitors hurting, it's time to make a move and ramp up spending. Conversely, cutting back and waiting for things to stabilize further is a completely justifiable approach.
Of course, coming up with a number you're comfortable spending is only part of the budgeting process. You'll also need to dig deep into where those dollars are best spent. Here are some tips on how to build a budget and allocate your resources most effectively.
Marketing Budget: How much?
Old rules of thumb have it that the amount you spend on marketing per year should range anywhere from 1 percent to 10 percent of sales, or possibly more, depending on several factors, including:
Peter Geisheker, chief executive of the The Geisheker Group, a marketing consultancy, suggests investing as much as you possibly can on marketing, especially in those first few years.
'Your first couple of years, you have to spend as much money as you can possibly afford,' Geisheker says, even up to 15 percent. 'Once you become established and you're very profitable, you may want to drop down. It's going to depend on the type of business and your profit margins.' If you're in a business where profit margins are high, Geisheker says it's OK to keep spending a fairly high amount on marketing to make sure your company keeps getting noticed.
When you're coming up with an annual figure for marketing costs, don't forget about related expenses, like market research, attending functions and trade shows, training yourself and others, and hiring experts to help you with special projects, such as improving your website and beefing up its content. And always allow a bit extra for the unexpected.
Marketing Budget: Where and How?
Once you have your annual amount, the challenge then becomes one of allocating among the many marketing channels available to you.
They include traditional options such as:
Don't forget that some of the most essential marketing tools today are also some of the most cost-effective, such as your website, and social networking sites like LinkedIn Facebook, and Twitter.
The key when allocating among them all is to start by thinking about exactly whom you want to reach, and what media they're likely to use.
'You'll be more successful in marketing when you really know who your niche markets are,' Geisheker said.
David Scott, author of 'The New Rules of Marketing and PR,' agrees. 'It's always best to start with the people you're trying to reach. Most organizations start with their product or their service, but that's an egotistical approach to reaching potential customers.'
Scott added: 'You have to think, ‘Who is it I'm trying to reach, and where can I find those people?' That will help to drive and inform your marketing.'
A great thing about your website, of course, is that there your potential customers have already found you. You have their attention, and what they need from you now is helpful information.
Therefore, it's important to spend time and money improving the content of your website, and differentiating yourself from the crowd by providing helpful, personal, interesting content, not just a marquee ad.
Sometimes that may involve hiring a journalist to help you write blog posts, add good and readable content to your site, or shoot short videos for the site that convey useful information, Scott suggests.
'I don't advocate spending a lot of money on marketing. I do advocate creating great content.'
For social networking sites, Scott recommends thinking in terms of a cocktail party. How do you act there? Do you like small talk with many people? If so, Twitter might be for you. Or do you prefer in-depth conversations where you get to know a bit more about one or two people? Perhaps blogging is a good way to go. If you're always networking, even at the grocery store, LinkedIn might be a great way to help you gain customers.
No matter what social networking tools you use, always keep in mind the quality of what you're writing and the information you're providing.
Marketing Budget: Track, track, track
Regardless of how you decide to allocate resources in 2011, once you start shelling out the ducats, it's critical to follow the performance of your marketing efforts closely.
One way to do so: Be vigilant about tracking how each customer finds you. Include the question on any inquiry form on your website, and ask each time a new customer comes in to your brick and mortar store, if you have one.
Then, do the math to figure out how much you've spent to attract that customer, and see if he or she keeps coming back. The marketing cost of attracting that customer will go down -- and your profits will go up -- once the customer starts spending more and more with you during the year.
If some part of your marketing plan is not working out as well as you expected, tweak it.
There's a reason why the best racecar drivers have the best mechanics, Geisheker points out. 'They're always tweaking and adjusting the car's performance.'
So, if you're getting more customers through your content-rich website, or more people are reading your blogs and following your tweets, keep spending your time and/or money on those efforts. If more of your ideal customers are finding you from a print ad in a local magazine, or because they heard about you on the radio, terrific. Spend more there, and less on the disappointing channels. Your marketing budget isn't necessarily set in stone all year. Adjust it.
'You have to have a testing approach,' emphasizes Michael Fisher, senior vice president of sales and marketing at Alterian, a marketing analytics software company. 'Measure your marketing. Go out and test it to understand the value of what you're spending.'
Your ability and willingness to change on the fly can be a huge competitive advantage with all the available avenues to promote your business today.
'Small business has the most fabulous opportunity to act locally but think globally,' he said. 'And, they can do it more nimbly and cost-effectively today.'